Lockheed Martin

Lockheed just booked 65 billion dollars of new orders in a single quarter, pushing its backlog to a record 230 billion dollars. That includes a 35 billion dollar multi-year deal with the Missile Defense Agency to build THAAD interceptors. That is roughly three years of sales already signed, and almost all of it comes from governments that reliably pay their bills.

Last year's problem quarters are in the rearview mirror. Sales rose 11% to 20.1 billion dollars, profit hit 1.8 billion dollars, or 7.94 per share, and free cash flow swung from negative 150 million dollars a year ago to positive 2.9 billion dollars. Management raised its full-year outlook, now expecting about 8% sales growth and more than 7 billion dollars in free cash flow.

Most of Lockheed's money comes from the U.S. government, and one program, the F-35, drove 475 million dollars of this quarter's sales increase by itself. If Washington trims the defense budget or shifts priorities, there is no consumer business to fall back on. With federal debt climbing, that spending is never fully guaranteed.

Many of Lockheed's deals are fixed-price, so when a project runs over budget the company eats the loss. That is exactly what happened a year ago, when 1.6 billion dollars in program losses crushed quarterly profit down to just 1.46 per share. Even this quarter carried 65 million dollars of unfavorable adjustments on Heavy Lift and 50 million on Seahawk helicopters, so bumpy quarters remain part of the deal.