Lockheed Martin
LMT
$508.77
-0.93%
Lockheed Martin is the world's largest defense contractor, primarily engaged in the design, manufacture, and integration of advanced technology systems for aerospace and defense. The company dominates the Western market for high-end fighter aircraft, with its F-35 program accounting for over two-thirds of its Aeronautics segment revenue, and also operates in rotary and mission systems, missiles and fire control, and space systems. The current investor narrative centers on record U.S. defense spending of $1.5 trillion in 2027, which is expected to boost Lockheed's massive backlog, while geopolitical tensions with Iran provide near-term tailwinds. However, concerns about execution risk on the Golden Dome missile defense system and supply chain vulnerabilities related to Chinese rare earths are also drawing attention.…
LMT
Lockheed Martin
$508.77
Related headlines
Investment Opinion: Should I buy LMT Today?
Rating: Hold. The thesis is that Lockheed Martin offers a reasonable risk/reward at current levels given the forward P/E discount and defense spending tailwinds, but flat revenue and margin compression warrant caution. Analyst consensus is 'hold' with an average target of $608.42, implying 19.6% upside.
Supporting evidence: The forward P/E of 15.86x is a 28% discount to the industry average of ~22x, providing a valuation cushion. Revenue growth is stagnant at 0.32% YoY, but the backlog is expected to benefit from $1.5 trillion in defense spending. Free cash flow TTM of $5.66 billion supports a 2.8% dividend yield. The average analyst target of $608.42 implies 19.6% upside from $508.77.
Risks & Conditions: The Hold rating would upgrade to Buy if revenue growth accelerates above 5% or if margins stabilize and expand. It would downgrade to Sell if free cash flow remains negative for two consecutive quarters or if the Golden Dome program faces major delays. Valuation verdict: Lockheed is fairly valued on a forward P/E basis but slightly overvalued on trailing P/E relative to history. The stock is not a clear bargain but offers a margin of safety if earnings meet expectations.
Sign up to view all
LMT 12-Month Price Forecast
Lockheed Martin's outlook is balanced: the stock offers a discounted forward P/E and a solid dividend, but flat revenue and margin compression limit upside. The base case of a gradual recovery to the analyst average target of $608 is most likely, but execution risks on Golden Dome and supply chain vulnerabilities could push the stock lower. The neutral stance reflects the lack of a clear catalyst for either a breakout or a breakdown. An upgrade to bullish would require evidence of accelerating revenue growth and margin expansion, while a downgrade to bearish would follow a sustained free cash flow deterioration.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Lockheed Martin's 12-month outlook, with a consensus price target around $608.42 and implied upside of +19.6% versus the current price.
Average Target
$608.42
0 analysts
Implied Upside
+19.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$487 - $756
Analyst target range
Lockheed Martin is covered by 19 analysts, with a consensus recommendation of 'hold' (mean rating 2.52 on a 1-5 scale where 1 is strong buy). The average target price is $608.42, implying approximately 19.6% upside from the current price of $508.77. The distribution shows a mix of hold and buy ratings, with recent upgrades from Citigroup (to Buy from Neutral) and a positive stance from Susquehanna, indicating some bullish sentiment. However, the overall consensus remains cautious, reflecting the flat revenue growth and recent stock decline. The target price range spans from a low of $487.00 to a high of $756.00, a spread of $269.00 or 55% of the average target, indicating high uncertainty among analysts. The low target of $487.00 suggests a potential 4.3% downside from current levels, likely pricing in margin compression or program delays, while the high target of $756.00 implies 48.6% upside, assuming accelerating growth from defense spending and successful program execution. Recent ratings actions show a mix: Citigroup upgraded from Neutral to Buy in July 2026, while other firms like TD Cowen and Jefferies maintain Hold ratings. The wide spread and mixed sentiment suggest that the stock's near-term direction is highly dependent on earnings delivery and geopolitical developments.
Drowning in data?
Find the real signal!
Bulls vs Bears: LMT Investment Factors
Lockheed Martin presents a mixed picture: the bull case rests on record defense spending, a discounted forward P/E, and strong free cash flow, while the bear case highlights flat revenue, margin compression, and elevated leverage. Currently, the bearish evidence is slightly stronger given the lack of top-line growth and deteriorating profitability. The single most important tension is whether the projected defense spending increases will translate into revenue growth and margin expansion, or if program delays and cost pressures will continue to weigh on results. Resolution of this tension will determine the stock's direction.
Bullish
- Record defense spending tailwind: U.S. defense spending is projected to reach $1.5 trillion in 2027, which should significantly boost Lockheed's massive backlog. The company's dominant position in fighter aircraft and missile systems positions it to capture a large share of this increase.
- Attractive forward P/E discount: Lockheed's forward P/E of 15.86x represents a 28% discount to the Aerospace & Defense industry average of ~22x. This suggests the market is pricing in below-average growth, creating potential upside if earnings materialize as expected.
- Strong free cash flow generation: Trailing twelve-month free cash flow is $5.66 billion, supporting a dividend yield of 2.8% and a payout ratio of 62.4%. This cash generation provides a cushion for shareholder returns and investment.
- Geopolitical tensions boost demand: Recent U.S.-Iran military escalation, including retaliatory strikes and blockade enforcement, directly increases demand for Lockheed's missile systems and fighter jets. This near-term catalyst has already driven defense stock rallies.
Bearish
- Flat revenue growth trajectory: Q1 2026 revenue of $18.02 billion grew only 0.32% year-over-year, and revenue has been range-bound between $18.0B and $20.3B for the past four quarters. This stagnation undermines the bull case of defense spending growth.
- Margin compression and declining profitability: Operating margin fell from 13.20% in Q1 2025 to 11.45% in Q1 2026, and net margin declined from 9.53% to 8.26%. This pressure suggests cost overruns or program mix shifts that could further erode earnings.
- Negative free cash flow in Q1 2026: Free cash flow swung from +$955 million in Q1 2025 to -$291 million in Q1 2026, driven by working capital outflows. This raises concerns about cash conversion and the sustainability of the dividend.
- Elevated debt and tight liquidity: Debt-to-equity ratio of 3.23x is high, and the current ratio of 1.09x indicates tight liquidity. The company's high ROE of 74.6% is partly driven by leverage, increasing financial risk.
LMT Technical Analysis
Lockheed Martin is in a clear downtrend over the past three months, with the stock declining 14.09% in that period and currently trading at $508.77, which is 73.5% of its 52-week range (low $410.11, high $692.00). The 1-year price change of +8.43% masks significant weakness since the April peak, as the stock has fallen from its 52-week high and is now closer to the lower end of the range, suggesting a loss of momentum and potential value opportunity if fundamentals support a floor. The 1-month price change of -4.42% and 3-month change of -14.09% indicate accelerating downside momentum, diverging sharply from the 1-year gain of 8.43%. This divergence suggests the stock is experiencing a mean-reversion pullback from overbought levels earlier in the year, rather than a structural trend reversal, but the speed of the decline warrants caution. The stock's beta of 0.113 indicates it is significantly less volatile than the broader market, meaning the recent decline is likely driven by company-specific factors rather than macro swings. Key support lies at the 52-week low of $410.11, a break below which would signal a bearish breakdown and potential further downside. Resistance is at the 52-week high of $692.00; a move above this level would indicate a resumption of the prior uptrend. Given the low beta, the stock's volatility is muted, but the sharp 27.35% maximum drawdown from the high highlights the risk of holding through corrections.
Beta
0.11
0.11x market volatility
Max Drawdown
-27.4%
Largest decline past year
52-Week Range
$410-$692
Price range past year
Annual Return
+8.4%
Cumulative gain past year
| Period | LMT Return | S&P 500 |
|---|---|---|
| 1m | -4.4% | -0.5% |
| 3m | -14.1% | +4.9% |
| 6m | -12.6% | +9.7% |
| 1y | +8.4% | +18.4% |
| ytd | +2.4% | +9.0% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
LMT Fundamental Analysis
Lockheed Martin's revenue trajectory is essentially flat, with Q1 2026 revenue of $18.02 billion representing a mere 0.32% year-over-year growth. Over the past four quarters, revenue has ranged from $18.02 billion to $20.33 billion, showing no clear growth trend. The Aeronautics segment contributed $6.95 billion in the most recent quarter, while Missiles and Fire Control added $3.65 billion, Rotary and Mission Systems $3.99 billion, and Space $3.43 billion. The lack of top-line growth is a concern for an investment case that relies on defense spending increases, suggesting that backlog conversion may be slow or that the company is facing program delays. Profitability remains solid but shows variability: net income in Q1 2026 was $1.49 billion, down from $1.71 billion in Q1 2025, and gross margin was 11.53%, slightly below the 12.93% in the year-ago quarter. Operating margin of 11.45% is healthy but compressed from 13.20% in Q1 2025, indicating some margin pressure. The company is profitable with a net margin of 8.26%, though this is below the 9.53% reported in Q1 2025, suggesting a slight deterioration in profitability. Lockheed Martin's balance sheet shows a debt-to-equity ratio of 3.23, which is elevated, and a current ratio of 1.09, indicating tight liquidity. Free cash flow was negative $291 million in Q1 2026, a sharp swing from positive $955 million in Q1 2025, driven by working capital outflows. However, trailing twelve-month free cash flow is $5.66 billion, and the company generates sufficient cash to cover its dividend, with a payout ratio of 62.4%. The ROE of 74.6% is exceptionally high, reflecting significant leverage, but the ROA of 7.2% is more moderate, indicating that the high ROE is partly due to debt.
Quarterly Revenue
$18.0B
2026-03
Revenue YoY Growth
+0.3%
YoY Comparison
Gross Margin
11.5%
Latest Quarter
Free Cash Flow
$5.7B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is LMT Overvalued?
Since Lockheed Martin has positive net income ($1.49 billion in Q1 2026), the primary valuation metric is the P/E ratio. The trailing P/E is 22.43x, while the forward P/E is 15.86x, implying the market expects earnings growth in the coming year. The gap between trailing and forward P/E suggests that analysts anticipate a significant earnings recovery, which is consistent with the estimated EPS of $38.98 for the current fiscal year. Compared to the Aerospace & Defense industry average P/E of approximately 22x (based on sector data), Lockheed's trailing P/E of 22.43x is roughly in line, trading at a slight 2% premium. However, the forward P/E of 15.86x represents a 28% discount to the industry forward average of about 22x, indicating that the market is pricing in below-average growth expectations relative to peers. Historically, Lockheed's trailing P/E has ranged from about 12x to 23x over the past five years. The current 22.43x is near the top of that historical range, suggesting the stock is not cheap on a trailing basis. However, the forward P/E of 15.86x is closer to the historical median, implying that if earnings materialize as expected, the valuation is reasonable. The P/B ratio of 16.62x is extremely high, reflecting the company's asset-light model and significant intangible value, but this is typical for defense primes.
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
16.7x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Lockheed's debt-to-equity ratio of 3.23x is elevated, and the current ratio of 1.09x indicates tight liquidity. Free cash flow turned negative in Q1 2026 at -$291 million, a sharp reversal from +$955 million a year earlier, raising concerns about cash generation. Revenue growth is essentially flat at 0.32% YoY, and operating margins have compressed from 13.20% to 11.45% over the past year, suggesting cost pressures or program mix shifts. The high ROE of 74.6% is partly a function of leverage, amplifying downside risk if earnings decline.
Market & Competitive Risks: The stock's beta of 0.113 indicates low market correlation, but the recent 14% decline over three months shows company-specific weakness. Valuation risk exists: the trailing P/E of 22.43x is near the top of its five-year range, leaving limited room for multiple expansion. Competitive threats include potential disruption from new entrants in missile defense and reliance on the F-35 program, which accounts for over two-thirds of Aeronautics revenue. Geopolitical tensions with Iran could escalate into broader conflict, disrupting supply chains, particularly rare earths from China.
Worst-Case Scenario: A combination of program delays (e.g., Golden Dome cost overruns), margin compression below 10%, and a recession cutting defense budgets could drive the stock to its 52-week low of $410.11. From the current price of $508.77, this represents a downside of approximately -19.4%. If earnings disappoint and the forward P/E contracts to 12x (historical low), the stock could fall to $468, a -8% decline. The maximum drawdown from the 52-week high of $692.00 was -27.35%, so a repeat of that magnitude would bring the stock to $369, a -27% loss from current levels.
FAQ
The key risks are: 1) Financial risk from high debt-to-equity of 3.23x and negative free cash flow in Q1 2026 (-$291 million), which could pressure the dividend. 2) Execution risk on the Golden Dome program, with costs potentially ballooning to $1.2 trillion, causing margin pressure. 3) Supply chain risk from reliance on Chinese rare earths for critical weapons systems, as highlighted by recent news. 4) Macro risk from potential defense budget cuts if fiscal tightening occurs. The most severe risk is a combination of these factors driving the stock to the 52-week low of $410.11, a -19% decline.
The 12-month forecast is balanced: the base case (50% probability) sees the stock trading around the analyst average target of $608.42, driven by stable earnings and a forward P/E of ~15.6x. The bull case (25% probability) targets $756, assuming revenue acceleration and margin recovery. The bear case (25% probability) targets $410-$508, if program delays or margin compression worsen. The most likely scenario is the base case, with gradual improvement from current levels. Key assumptions include defense spending growth and stable margins.
Lockheed's trailing P/E of 22.43x is near the top of its five-year range (12x-23x), suggesting it is not cheap on a historical basis. However, the forward P/E of 15.86x is a 28% discount to the Aerospace & Defense industry average of ~22x, indicating the market is pricing in below-average growth expectations. The P/B ratio of 16.62x is high but typical for defense primes. Overall, the stock appears fairly valued on a forward basis, with the valuation implying that earnings will recover to $38.98 per share. If earnings disappoint, the stock could be overvalued.
Lockheed Martin offers a reasonable risk/reward at $508.77, with a forward P/E of 15.86x (28% discount to industry) and an average analyst target of $608.42 implying 19.6% upside. However, flat revenue growth of 0.32% and margin compression from 13.2% to 11.45% are concerns. It is a good buy for income-oriented investors seeking a 2.8% dividend yield and moderate upside, but growth investors may find better opportunities elsewhere. The biggest downside risk is a -19% decline to the 52-week low of $410.11 if program delays or margin erosion worsen.
Lockheed Martin is best suited for long-term investment due to its low beta of 0.113, stable dividend yield of 2.8%, and exposure to secular defense spending trends. The stock's low volatility makes it less attractive for short-term trading, as recent price swings have been modest relative to the market. A minimum holding period of 3-5 years is recommended to capture the benefits of backlog conversion and defense budget cycles. Short-term traders may find limited opportunities given the stock's low beta and recent downtrend.
