Lockheed Martin
LMT
$551.51
+0.51%
Lockheed Martin is the world's largest defense prime contractor, operating across four segments: Aeronautics (F-35 and other combat aircraft), Rotary and Mission Systems (including Sikorsky helicopters), Missiles and Fire Control, and Space Systems, serving the U.S. Department of Defense and allied governments. Its competitive identity rests on program-of-record incumbency — decades-long, sole-source or limited-competition franchises like the F-35 that create enormous switching costs and multi-decade revenue visibility, making it the anchor name of the Western defense industrial base rather than a disruptor. The current investor narrative has pivoted decisively toward the missiles and missile defense franchise, which UBS recently argued can compound roughly 20% annually, reinforced by the Trump administration's JATM procurement deal and global munitions restocking driven by Iran-related tensions. That bullish thesis is being weighed against a lumpy F-35-driven Aeronautics outlook and a stock that has round-tripped a violent mid-year rally, leaving investors debating whether the missile-led growth story justifies a re-rating or whether the recent bounce is a mean-reversion trade within a broader range.…
LMT
Lockheed Martin
$551.51
Related headlines
Investment Opinion: Should I buy LMT Today?
Rating: Hold with a bias to accumulate on weakness. The core thesis is that LMT offers a fairly valued defense prime with a missile-led growth optionality, anchored by a consensus 'buy' rating (mean 2.30) and an average target of $618.86 implying +12.1% upside. However, after the 3.65% single-day bounce to $552.09, upside to consensus is roughly equal to downside to the $486 low target, so the risk/reward does not justify chasing at current levels.
The supporting evidence is constructive: forward PE of 16.89x is at or below the large-cap defense peer group (high-teens to low-20s), revenue grew 10.51% YoY in Q2 2026 with four consecutive quarters of growth, trailing free cash flow is $8.73 billion, and the 2.80% dividend yield exceeds the sector median with a sustainable 62.4% payout ratio. Analyst estimates for 2027 EPS of $40.60 and revenue of $99.29 billion underpin the growth narrative, and the UBS/Citigroup upgrades signal improving sentiment. Against this, gross margin of 12.19% and net margin of 6.68% are thin, and debt-to-equity of 3.23x limits financial flexibility.
The biggest risks that could invalidate the thesis are: (1) missile segment growth failing to approach UBS's 20% projection, (2) F-35 delivery or budget setbacks, and (3) margin compression from cost-plus contract renegotiations. The rating would upgrade to Buy if the stock pulls back toward the $499–$510 support zone (implying ~18% upside to consensus) or if missile segment growth is confirmed above 15% in Q3 results. It would downgrade to Sell if revenue growth decelerates below 5% or if forward PE expands above 20x without commensurate earnings growth. Valuation verdict: fairly valued relative to history and peers, with a modest discount to the consensus target — not a deep-value opportunity, but not an optimistic-expectations trap either.
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LMT 12-Month Price Forecast
LMT presents a balanced risk/reward at $552.09: the forward PE of 16.89x is attractive for a defense prime with double-digit revenue growth, and the missile franchise offers credible upside if UBS's 20% growth projection materializes. However, the stock has already bounced 3.65% in a single session and sits mid-range, with upside to the $618.86 consensus target roughly equal to downside to the $486 low target. The base case (50% probability) targets $580–$620, reflecting steady execution without a major re-rating. I would upgrade to bullish if the stock pulls back toward $499–$510 support or if Q3 earnings confirm missile growth above 15%; I would downgrade to bearish if revenue growth decelerates below 5% or if F-35 program issues emerge.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Lockheed Martin's 12-month outlook, with a consensus price target around $618.86 and implied upside of +12.2% versus the current price.
Average Target
$618.86
0 analysts
Implied Upside
+12.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$486 - $756
Analyst target range
Coverage is broad and constructive: 21 analysts cover LMT with a consensus recommendation of "buy" (mean rating 2.30 on a 1–5 scale where lower is more bullish), and the average target price of $618.86 implies roughly +12.1% upside from the current $552.09. Consensus 2027 EPS of $40.60 (range $38.76–$41.90) and revenue of $99.29 billion (range $95.82–$101.72 billion) underpin that target, and the sentiment trend is clearly improving — UBS upgraded to Buy from Neutral on September 8, 2026, and Citigroup moved to Buy from Neutral on July 1, 2026, while Morgan Stanley, RBC, and TD Cowen remain at Equal Weight/Sector Perform/Hold. The consensus therefore leans moderately bullish, with the bulls concentrated in the upgrade camp and the hold-rated analysts anchored on valuation and F-35 program risk.
The target range of $486 to $756 is wide — a spread of $270, or about 49% of the current price — which signals genuine disagreement about the missile-growth trajectory rather than a lack of coverage. The $756 high target implicitly assumes the Missiles and Fire Control franchise compounds near the 20% rate UBS projects, driving multiple expansion toward the upper end of LMT's historical band; the $486 low target prices in margin compression, slower F-35 deliveries, and a reversion to the low end of the historical PE range. With the stock having rallied 3.65% in the latest session toward the consensus target, the risk/reward is narrowing: upside to consensus is now about 12% versus roughly 12% downside to the low target, a roughly symmetric setup that argues for patience on entry rather than chasing the bounce.
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Bulls vs Bears: LMT Investment Factors
The bull case currently has stronger evidence: revenue is re-accelerating at 10.51% YoY, forward PE of 16.89x is cheap for a defense prime, free cash flow of $8.73 billion is robust, and analyst sentiment is improving with UBS and Citigroup upgrades. The bear case rests on structural margin thinness (12.19% gross margin), elevated leverage (3.23x D/E), and F-35 concentration risk, but these are well-known and largely priced in. The single most important tension is whether the Missiles and Fire Control segment can truly compound near 20% as UBS projects — if it does, the stock re-rates toward the $756 high target; if missile growth disappoints, the stock remains a range-bound value play with limited upside. Near-term, the 3.65% single-day bounce and symmetric risk/reward to analyst targets suggest waiting for a pullback toward the $499–$510 support zone rather than chasing.
Bullish
- Missile franchise poised for 20% growth: UBS upgraded LMT to Buy on September 8, 2026, arguing the Missiles and Fire Control segment can compound roughly 20% annually. The Trump administration's JATM procurement deal and global munitions restocking from Iran-related tensions provide a multi-year demand tailwind. This segment generated $4.10 billion in Q2 2026, and accelerating it toward 20% growth would materially lift consolidated revenue.
- Revenue re-accelerating with four straight YoY gains: Q2 2026 revenue rose 10.51% YoY to $20.06 billion, following Q1 2026's $18.02 billion (up from $17.96 billion), Q4 2025's $20.33 billion (up from $18.62 billion), and Q3 2025's $18.61 billion (up from $17.10 billion). This four-quarter streak of YoY growth contrasts with the prior stagnation and supports the re-rating thesis.
- Forward PE of 16.89x is cheap for defense prime: LMT trades at 16.89x forward earnings versus a trailing 22.43x, implying ~25% EPS growth is expected. This forward multiple is at or below the large-cap defense peer group (RTX, NOC, GD typically high-teens to low-20s) and near the middle of LMT's historical PE band (11.8x–23.1x). The market is not pricing in missile-led acceleration.
- Strong free cash flow and dividend coverage: Trailing free cash flow is $8.73 billion, with Q2 2026 FCF of $2.92 billion on $3.24 billion operating cash flow against only $318 million capex. The $796 million quarterly dividend consumed just 27% of operating cash flow, and the 2.80% yield exceeds the sector median, providing a valuation floor.
Bearish
- Leverage is elevated and constrains flexibility: Debt-to-equity stands at 3.23x with total debt to capitalization near 70%, and the current ratio of 1.09 is thin for an industrial. While interest coverage of ~9.3x on Q2 operating income of $2.48 billion against $266 million interest expense is comfortable, the balance sheet leaves limited cushion to delever while funding growth and shareholder returns.
- Margins remain structurally thin: Q2 2026 gross margin was 12.19% and operating margin 12.36%, with trailing net margin only 6.68%. The cost-plus/competitive nature of defense contracting caps pricing power, and the ugly Q2 2025 (1.88% net margin on a charge) shows how quickly margins can deteriorate. ROE of 74.6% is flattered by leverage, not operational excellence.
- F-35 concentration and program risk: Aeronautics is the largest segment at $8.11 billion in Q2 2026, with upward of two-thirds of its revenue from the F-35. Any slowdown in F-35 deliveries, budget scrutiny, or international order delays would disproportionately hit the top line and is a key reason Morgan Stanley, RBC, and TD Cowen remain at Hold/Equal Weight.
- Stock is mid-range with weak 6-month momentum: Despite an 11.93% 1-year gain, LMT is only 44.7% through its 52-week range ($437.25–$692.00) and sits 20% below the high. The 6-month change is -6.77% versus +11.93% for the year, and relative strength vs. SPY is -14.25 points over six months, showing the trend has flattened rather than accelerated.
LMT Technical Analysis
LMT is in a choppy, range-bound recovery rather than a clean uptrend: the stock is up 11.93% over the past year and 11.07% year-to-date, but sits only about 44.7% of the way through its 52-week range of $437.25 to $692.00, with the current price of $552.09 roughly 20% below the 52-week high. That positioning — mid-range rather than near highs — argues against overextension and instead frames the stock as a consolidation candidate, though the -27.35% max drawdown over the period shows how punishing the prior decline was for momentum holders. The 6-month change of -6.77% versus the 1-year gain of +11.93% confirms the trend has flattened rather than accelerated.
Short-term momentum has turned sharply positive and is now diverging bullishly from the longer-term trend: the stock is up 2.76% over one month and 8.51% over three months, and the most recent session alone delivered a +3.65% jump from $532.64 to $552.09 on 1.60 million shares. Relative strength confirms the turn — LMT has outperformed SPY by 5.82 percentage points over three months and 1.54 points over one month, a stark reversal from the -14.25 point relative weakness over six months. This pattern (weak 6-month, strong 3-month and 1-month) is characteristic of a bottoming/mean-reversion phase rather than a trend reversal confirmation, and the stock needs follow-through above the August highs to validate it.
Key levels are well defined: resistance sits at the 52-week high of $692.00, with intermediate supply around the August peak near $608.68, while support rests at the 52-week low of $437.25 and, more immediately, the October low near $499.22. A breakout above $608–$610 would signal a genuine trend change and open a path toward the $692 high, whereas a breakdown below $499 would reassert the six-month downtrend and put the $437 low in play. Volatility is unusually low for an equity — beta of just 0.095 implies roughly 90% less volatility than SPY, consistent with defense-contractor defensiveness — but that low beta also means the recent 3.65% single-day move was a large outlier, and position sizing should account for gap risk around earnings and contract headlines rather than day-to-day beta.
Beta
0.10
0.10x market volatility
Max Drawdown
-27.4%
Largest decline past year
52-Week Range
$437-$692
Price range past year
Annual Return
+12.7%
Cumulative gain past year
| Period | LMT Return | S&P 500 |
|---|---|---|
| 1m | +3.0% | -0.1% |
| 3m | -3.0% | +4.7% |
| 6m | +7.4% | +8.3% |
| 1y | +12.7% | +15.2% |
| ytd | +11.0% | +13.4% |
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LMT Fundamental Analysis
Revenue is re-accelerating: Q2 2026 (quarter ended June 28, 2026) revenue reached $20.06 billion, up 10.51% year-over-year from $18.16 billion in Q2 2025, and up sequentially from $18.02 billion in Q1 2026. The multi-quarter trend is constructive — Q1 2026 grew to $18.02 billion from $17.96 billion a year earlier, Q4 2025 posted $20.33 billion versus $18.62 billion in Q4 2024, and Q3 2025 came in at $18.61 billion versus $17.10 billion — so the top line has now grown year-over-year in each of the last four reported quarters. Segment mix shows Aeronautics as the dominant driver at $8.11 billion, followed by Rotary and Mission Systems at $4.35 billion, Missiles and Fire Control at $4.10 billion, and Space at $3.50 billion; the missile segment is the smallest of the three major non-aeronautics units but is the one analysts expect to compound fastest, which is the crux of the growth debate.
Profitability is solid but margin-constrained by the cost-plus/competitive nature of defense contracting: Q2 2026 net income was $1.836 billion on a 9.15% net margin, with gross margin of 12.19% and operating margin of 12.36%, while the trailing net margin is 6.68% and gross margin 10.15% — the gap between quarterly and trailing figures reflects the ugly Q2 2025 (net income just $342 million, 1.88% net margin) that is now rolling out of the comparison. Margins are stable-to-improving sequentially: gross margin rose from 11.53% in Q1 2026 to 12.19% in Q2 2026, and operating margin from 11.45% to 12.36%, while Q2 2025's 4.04% gross margin shows how severe the prior charge-driven quarter was. ROE of 74.6% and ROA of 8.64% look exceptional but are flattered by a highly levered capital structure (equity multiplier above 7x), so they should be read as capital-efficiency optics rather than a signal of pristine balance-sheet quality.
Balance-sheet leverage is the key risk: debt-to-equity stands at 3.23x, total debt to capitalization is roughly 70%, and the current ratio of 1.09 is thin for an industrial, though interest coverage of about 9.3x on Q2 operating income of $2.479 billion against $266 million of interest expense remains comfortable. Cash generation is strong — trailing free cash flow is $8.729 billion, Q2 2026 FCF was $2.917 billion on operating cash flow of $3.235 billion against $318 million of capex, and the dividend of $796 million consumed only about 27% of quarterly operating cash flow. The caveat is working-capital volatility: Q1 2026 FCF was -$291 million on a $1.445 billion working-capital drain, so cash flow is seasonal and lumpy, and with a 2.80% dividend yield and a 62.4% payout ratio, the company funds growth and shareholder returns internally but has limited cushion to also delever aggressively.
Quarterly Revenue
$20.1B
2026-06
Revenue YoY Growth
+10.5%
YoY Comparison
Gross Margin
12.2%
Latest Quarter
Free Cash Flow
$8.7B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is LMT Overvalued?
Because net income is positive ($1.836 billion in Q2 2026), the PE ratio is the primary metric: LMT trades at 22.43x trailing earnings but only 16.89x forward earnings, a roughly 25% compression that implies the market expects meaningful EPS growth — consistent with consensus 2027 EPS estimates of $40.60 versus the current run-rate. The forward multiple is the more decision-relevant figure here, and at under 17x forward earnings the stock screens cheap for a defense prime with double-digit revenue growth, which is precisely the argument UBS made in upgrading the name.
On peer comparison, LMT's 1.49x price-to-sales and 1.81x EV/sales are modest, but its 14.81x EV/EBITDA and 16.62x price-to-book sit at a premium to book value that reflects the levered equity base rather than rich operating valuation; the 16.89x forward PE is broadly in line with, and arguably at a slight discount to, the large-cap defense prime group (RTX, NOC, GD typically trade in the high-teens to low-20s forward PE), so there is no obvious premium being paid for Lockheed's franchise. The 2.80% dividend yield is above the sector median and provides a valuation floor, while the negative PEG ratio of -6.05 is a mechanical artifact of prior-year earnings distortion and should be disregarded. On balance, the discount-to-history and in-line-to-cheap peer positioning suggest the market is not pricing in the missile-led growth acceleration.
Historically, LMT's PE has ranged from roughly 11.8x (Q4 2021) to 23.1x (Q1 2026), with the trailing 22.43x sitting near the top of that band — but that is distorted by the depressed Q2 2025 earnings base, and the forward 16.89x is closer to the middle of the historical range (Q4 2025 was 20.78x, Q3 2025 17.62x, Q4 2023 14.89x). Price-to-sales of 1.49x compares favorably with historical readings of 5.5x–8.1x in the historical ratios data, though that series appears computed on different share/revenue conventions and should be treated cautiously. The cleaner read is that the stock is priced near the middle of its own earnings multiple band with improving fundamentals — not a deep-value opportunity, but not an optimistic-expectations trap either.
PE
22.4x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 12x~23x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.8x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on leverage and margin fragility. Debt-to-equity of 3.23x and total debt to capitalization near 70% leave limited balance-sheet cushion, while the current ratio of 1.09 is thin for an industrial. Gross margin of 12.19% and operating margin of 12.36% in Q2 2026 are structurally capped by cost-plus contracting, and the Q2 2025 net margin of just 1.88% on a charge demonstrates how quickly profitability can collapse. Revenue concentration is acute: Aeronautics at $8.11 billion derives upward of two-thirds from the F-35, so any delivery slowdown or budget cut would disproportionately hit results. Finally, free cash flow is lumpy — Q1 2026 FCF was -$291 million on a $1.45 billion working-capital drain — and with a 62.4% payout ratio, the company has limited room to simultaneously delever and grow the dividend.
Market and competitive risks include valuation compression and program competition. At 16.89x forward earnings, LMT is fairly valued versus peers, but a reversion to the low end of its historical PE band (11.8x) would imply significant downside; the negative PEG ratio of -6.05 is a mechanical artifact and offers no support. Beta of just 0.095 means the stock is ~90% less volatile than SPY, but that defensiveness also means the recent 3.65% single-day move was an outlier and gap risk around earnings and contract headlines is real. Competitive threats are emerging: Northrop Grumman's loss of the CCA hardware contract and Rocket Lab's $397 million Space Force win show that adjacent players are contesting space and drone adjacencies, while Boeing remains a turnaround competitor in satellites. Regulatory and budget risk is ever-present — the JATM deal is a tailwind, but a shift in Pentagon priorities or a continuing resolution could delay awards.
Worst-case scenario: missile growth disappoints (failing to approach UBS's 20% projection), F-35 deliveries slip, and margin pressure resurfaces, causing analysts to converge on the $486 low target — a 12% decline from $552.09. A more severe outcome would revisit the 52-week low of $437.25, a 20.8% loss from current levels, consistent with the -27.35% max drawdown already experienced over the past year. In that scenario, the stock would trade near 12x forward earnings, reflecting a full de-rating to the bottom of its historical band. Investors should size positions to withstand a 20–27% drawdown, which is realistic given the stock's recent history.
FAQ
The most severe risk is financial leverage: debt-to-equity of 3.23x and total debt to capitalization near 70% leave limited flexibility, and the current ratio of 1.09 is thin. Second is margin fragility — gross margin of 12.19% and net margin of 6.68% are structurally capped, and the Q2 2025 net margin of 1.88% shows how quickly a charge can erode profitability. Third is revenue concentration: Aeronautics at $8.11 billion derives upward of two-thirds from the F-35, so any delivery slowdown or budget cut would disproportionately hit results. Fourth is valuation compression risk — a reversion to the low end of the historical PE band (11.8x) would imply significant downside, and the stock's 6-month relative weakness of -14.25 points vs. SPY shows momentum can reverse.
The 12-month forecast has three scenarios: a bull case (30% probability) targeting $692–$756 if missile growth approaches 20% and the multiple expands; a base case (50% probability) targeting $580–$620, aligned with the $618.86 analyst average, assuming high-single to low-double-digit revenue growth and stable margins; and a bear case (20% probability) targeting $437–$486 if missile growth disappoints and F-35 issues emerge. The base case is most likely, with the key assumption being that consolidated revenue grows 8–10% in 2027, in line with the $99.29 billion consensus. The wide $270 analyst target spread (49% of price) reflects genuine disagreement about the missile trajectory.
LMT appears fairly valued to slightly undervalued. Its forward PE of 16.89x is below the trailing 22.43x and sits near the middle of its historical band (11.8x–23.1x), while being at or below the large-cap defense peer group (RTX, NOC, GD typically high-teens to low-20s). The 1.49x price-to-sales and 1.81x EV/sales are modest, though the 16.62x price-to-book reflects a levered equity base rather than rich operating valuation. The 2.80% dividend yield is above the sector median and provides a valuation floor. The market is not pricing in the missile-led growth acceleration that UBS projects, implying that if growth materializes, there is room for multiple expansion toward the $756 high target.
From a risk/reward perspective, LMT is a reasonable but not compelling buy at $552.09. The stock offers ~12.1% upside to the $618.86 consensus target, supported by a 16.89x forward PE that is cheap versus its 22.43x trailing multiple and in line with defense peers. However, downside to the $486 low target is also ~12%, making the setup roughly symmetric after the recent 3.65% bounce. The biggest downside risk is a 20.8% decline to the 52-week low of $437.25 if missile growth disappoints. LMT is a good buy for income-oriented investors seeking a 2.80% dividend yield and defensive exposure, particularly on a pullback toward the $499–$510 support zone. It is less suited for growth investors seeking rapid capital appreciation.
LMT is best suited for long-term investment with a minimum holding period of 2–3 years. Its beta of 0.095 means it is ~90% less volatile than SPY, making it a poor candidate for short-term trading, though gap risk around earnings and contract headlines can create sharp single-day moves like the recent 3.65% jump. The 2.80% dividend yield and 62.4% payout ratio provide steady income, and the multi-decade F-35 and missile franchise visibility supports long-term compounding. Short-term traders should note the stock is mid-range with symmetric risk/reward and weak 6-month momentum (-6.77%), offering limited edge. Long-term investors can accumulate on pullbacks toward $499–$510 and hold through program cycles.