Microsoft Excel LibreOffice Calc

Lockheed Martin Corp. (NYSE:LMT)

Enterprise Value to FCFF (EV/FCFF)

Intermediate level

Free Cash Flow to The Firm (FCFF)

Lockheed Martin Corp., FCFF calculation

US$ in millions

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12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net earnings 6,230  5,046  2,002  5,302  3,605 
Net noncash charges 1,823  1,990  4,799  (245) 1,322 
Changes in assets and liabilities (742) (3,898) (325) 132  174 
Net cash provided by operating activities 7,311  3,138  6,476  5,189  5,101 
Interest payments, net of tax1 538  544  439  461  322 
Capital expenditures (1,484) (1,278) (1,177) (1,063) (939)
Free cash flow to the firm (FCFF) 6,365  2,404  5,738  4,587  4,484 

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24).

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Item Description The company
FCFF Free cash flow to the firm is the cash flow available to the Lockheed Martin Corp.’s suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made. Lockheed Martin Corp.’s FCFF decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Interest Paid, Net of Tax

Lockheed Martin Corp., interest paid, net of tax calculation

US$ in millions

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12 months ended Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Effective Income Tax Rate (EITR)
EITR1 14.00% 14.30% 28.10% 23.20% 27.30%
Interest Paid, Net of Tax
Interest payments, before tax 625  635  610  600  443 
Less: Interest payments, tax2 88  91  171  139  121 
Interest payments, net of tax 538  544  439  461  322 

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24).

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2 2019 Calculation
Interest payments, tax = Interest payments × EITR
= 625 × 14.00% = 88

Enterprise Value to FCFF Ratio, Current

Lockheed Martin Corp., current EV/FCFF calculation, comparison to benchmarks

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Selected Financial Data (US$ in millions)
Enterprise value (EV) 113,079 
Free cash flow to the firm (FCFF) 6,365 
Valuation Ratio
EV/FCFF 17.77
Benchmarks
EV/FCFF, Competitors1
Boeing Co. —
General Dynamics Corp. 21.59
Northrop Grumman Corp. 19.15
Raytheon Technologies Corp. 11.72
EV/FCFF, Sector
Aerospace & Defense 24.59
EV/FCFF, Industry
Industrials 19.64

Based on: 10-K (filing date: 2020-02-07).

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If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Enterprise Value to FCFF Ratio, Historical

Lockheed Martin Corp., historical EV/FCFF calculation, comparison to benchmarks

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Enterprise value (EV)1 135,002  98,580  108,976  87,500  80,349 
Free cash flow to the firm (FCFF)2 6,365  2,404  5,738  4,587  4,484 
Valuation Ratio
EV/FCFF3 21.21 41.00 18.99 19.08 17.92
Benchmarks
EV/FCFF, Competitors4
Boeing Co. — 16.40 16.93 11.76 10.11
General Dynamics Corp. 27.60 22.64 17.96 30.53 20.94
Northrop Grumman Corp. 21.80 20.12 33.26 21.05 20.20
Raytheon Technologies Corp. 21.94 27.92 27.84 19.13 14.87
EV/FCFF, Sector
Aerospace & Defense 37.51 21.75 20.45 17.48 14.89
EV/FCFF, Industry
Industrials 25.03 22.84 24.67 23.48 19.99

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-06), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-24).

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3 2019 Calculation
EV/FCFF = EV ÷ FCFF
= 135,002 ÷ 6,365 = 21.21

4 Click competitor name to see calculations.

Valuation ratio Description The company
EV/FCFF Enterprise value to free cash flow to the firm is whole company valuation indicator. Lockheed Martin Corp.’s EV/FCFF ratio increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.