Return On Capital Employed Overview: Lockheed Martin

Lockheed Martin LMT showed a loss in earnings since Q1, totaling $1.72 billion. Sales, on the other hand, increased by 3.64% to $16.22 billion during Q2. Lockheed Martin earned $7.31 billion and $15.65 billion in sales in Q1.

What Is ROCE?

Changes in earnings and sales indicate shifts in Lockheed Martin’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Lockheed Martin posted an ROCE of 2.32%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Lockheed Martin is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital which will lead to higher returns and earnings per share growth. In Lockheed Martin's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings

Lockheed Martin reported Q2 earnings per share at $5.79/share against analyst predictions of $5.72/share.