Lockheed Martin
LMT
$505.41
-0.02%
Lockheed Martin is the world's largest defense contractor, operating across four core segments: Aeronautics (dominated by the F-35 Joint Strike Fighter), Missiles and Fire Control, Rotary and Mission Systems (including Sikorsky helicopters), and Space Systems, which also captures equity income from the United Launch Alliance joint venture. Its competitive identity rests on unmatched scale, a decades-long franchise in high-end fighter aircraft, and a program backlog that makes it a bellwether for Western defense procurement rather than a disruptor or niche player. The current investor narrative centers on a powerful demand tailwind from record U.S. defense spending — highlighted by the Trump administration's JATM missile procurement deal and a proposed $1.5 trillion 2027 defense budget — alongside a sharp Q2 profit rebound (444% earnings growth and a 3.2x book-to-bill ratio) that has revived the bull case after a weak mid-2025 stretch. At the same time, the stock has materially lagged the S&P 500 over the past year, leaving investors debating whether the backlog-driven earnings recovery is already priced in or whether the recent pullback represents an attractive entry point.…
LMT
Lockheed Martin
$505.41
Related headlines
Investment Opinion: Should I buy LMT Today?
The synthesized recommendation is Hold, with a constructive bias toward accumulating on weakness. The core thesis is that Lockheed's record backlog (3.2x book-to-bill) and the structural U.S. defense spending tailwind ($1.5 trillion proposed 2027 budget) will eventually drive revenue and earnings acceleration, but the timing is uncertain and the current 0.32% revenue growth does not yet validate the bull case. The analyst consensus of "buy" with a mean rating of 2.43 and an average target of $637.84 (22.8% upside) supports a positive medium-term view, but the lack of recent upgrades — most actions are reiterations rather than rating changes — suggests the analyst community is waiting for evidence before turning more constructive.
The supporting evidence for a Hold-with-upside-bias is fourfold. First, valuation is bifurcated: the trailing PE of 22.43x is near the high end of the 15-23x historical band, but the forward PE of 15.86x is near the low end, implying the market expects a substantial EPS recovery to $40.60. Second, profitability is recovering from the Q2 2025 trough — gross margin of 11.53% in Q1 2026 is well above the 4.04% trough but below the 12.93% year-ago level, so the trend is positive but incomplete. Third, free cash flow of $5.66 billion TTM comfortably covers the 2.80% dividend yield and 62.4% payout ratio, providing a valuation floor. Fourth, the analyst low target of $503.00 is only 3.2% below the current price, suggesting limited downside even in a bear scenario, while the high target of $756.00 implies 45.5% upside if backlog conversion accelerates.
The biggest risks that could invalidate this thesis are: (1) revenue growth remaining below 1% for another year, which would force analysts to cut forward EPS estimates and compress the forward PE; (2) a new F-35 program charge similar to the Q2 2025 event that crushed margins to 4.04%; and (3) continued underperformance versus SPY, which could trigger further institutional selling. The rating would upgrade to Buy if revenue growth accelerates above 3% year-over-year and gross margin recovers above 12%, or if the stock pulls back toward the $480-500 range while the backlog remains intact. It would downgrade to Sell if revenue growth turns negative, gross margin falls below 10%, or free cash flow turns negative on a TTM basis. On balance, LMT appears fairly valued to slightly undervalued relative to its forward earnings power, but expensive relative to its trailing results and its own recent history — a classic "show me" story where the stock is priced for a recovery that has not yet appeared in the revenue line.
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LMT 12-Month Price Forecast
Lockheed Martin presents a classic value-versus-timing dilemma: the forward valuation (15.86x PE) and analyst targets ($637.84 average) imply a substantial earnings recovery, but the current revenue growth of 0.32% and negative Q1 free cash flow show that recovery has not yet begun. The stock's beta of 0.104 and 2.80% dividend yield make it a defensive holding, but the -37.28 percentage point 6-month relative underperformance versus SPY suggests the market is unwilling to pay for the recovery until it sees evidence. I would upgrade to bullish if Q3 2026 revenue growth exceeds 3% and gross margin recovers above 12%, confirming backlog conversion; I would downgrade to bearish if revenue growth turns negative or a new F-35 program charge pushes gross margin below 10%. At the current price of $519.56, the risk-reward is balanced — limited downside to the $503 analyst low target, meaningful upside to the $637.84 average — but the lack of a near-term catalyst makes patience essential.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Lockheed Martin's 12-month outlook, with a consensus price target around $636.74 and implied upside of +26.0% versus the current price.
Average Target
$636.74
0 analysts
Implied Upside
+26.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$503 - $756
Analyst target range
Coverage is robust with 19 analysts, and the consensus recommendation is "buy" with a recommendation mean of 2.43 (on a scale where lower is more bullish), indicating a moderately bullish but not euphoric stance. The average target price of $637.84 implies roughly +22.8% upside from the current price of $519.56, a meaningful gap that suggests the analyst community sees the recent selloff as overdone relative to fundamentals. The distribution of recent institutional ratings leans cautious-to-constructive: Citigroup upgraded to Buy from Neutral on 2026-07-01, while TD Cowen, RBC Capital, Morgan Stanley, and Jefferies all maintained Hold/Sector Perform/Equal Weight ratings, and Susquehanna reiterated Positive — a mix that reflects confidence in the backlog and defense-spending tailwind but hesitation about near-term revenue growth and margin execution. The consensus is therefore best characterized as bullish on price target but neutral-to-cautiously-positive on near-term rating, with the upgrade cycle appearing to have stalled after the mid-year rally. The target range is wide, spanning from a low of $503.00 (just 3.2% below the current price) to a high of $756.00 (45.5% above), a spread of $253 or roughly 50% of the average target — signaling meaningful disagreement about the company's trajectory. The high target of $756 likely assumes successful conversion of the record backlog into revenue, margin expansion back toward the 12-13% gross margin range, and multiple expansion driven by the $1.5 trillion defense budget and JATM procurement tailwinds. The low target of $503 essentially prices in stagnation — flat revenue, continued margin pressure, and no re-rating — implying that even the bear case sees limited downside from current levels, which is a constructive signal. The wide spread, combined with the fact that the low target is only marginally below the current price, suggests the risk-reward is skewed favorably, though the lack of recent upgrades (most actions are reiterations rather than rating changes) indicates analysts are waiting for evidence of revenue acceleration before turning more constructive.
Bulls vs Bears: LMT Investment Factors
The bear case currently has stronger near-term evidence: revenue growth of 0.32% is effectively flat, margins remain below year-ago levels, Q1 free cash flow was negative, and the stock has underperformed SPY by nearly 10 percentage points over the past year. However, the bull case rests on forward-looking data that is genuinely compelling — a 3.2x book-to-bill ratio, a forward PE of 15.86x versus a trailing PE of 22.43x, and an analyst average target of $637.84 implying 22.8% upside. The single most important tension is whether the record backlog converts into revenue growth in 2027; if it does, the forward earnings recovery justifies the current price and then some, but if backlog conversion remains slow, the stock could drift toward the analyst low target of $503.00 or the 52-week low of $437.25. The market is essentially asking investors to pay today for earnings that may not materialize until 2027-2028, and the recent price action suggests skepticism is winning in the short term.
Bullish
- Record backlog with 3.2x book-to-bill: Q2 2026 book-to-bill of 3.2x means the company booked $3.20 of new orders for every $1.00 of revenue recognized, a ratio that signals a multi-year revenue pipeline far exceeding current run-rate. With Q1 2026 revenue of $18.02 billion and a 3.2x book-to-bill, implied quarterly bookings are roughly $57.7 billion, which is why analysts model forward EPS of $40.60 versus trailing EPS of $0.045 (data anomaly) and a forward PE of just 15.86x.
- Forward PE of 15.86x is cheap vs. history: The forward PE of 15.86x sits near the low end of Lockheed's normalized 15-23x historical band, while the trailing PE of 22.43x sits near the high end. This 29% compression from trailing to forward multiple implies the market expects a substantial EPS recovery, and if the company merely hits the consensus $40.60 EPS estimate, the stock trades at a discount to its own 2023-2026 average.
- Analyst target implies 22.8% upside: The 19-analyst consensus average target of $637.84 is 22.8% above the current $519.56 price, and even the low target of $503.00 is only 3.2% below the current price. This asymmetry — limited downside to the bear target and substantial upside to the average — suggests the recent selloff has overshot fundamentals, especially with Citigroup upgrading to Buy on 2026-07-01.
- Defense spending tailwind is structural: The proposed $1.5 trillion 2027 U.S. defense budget and the Trump administration's JATM missile procurement deal represent multi-year funding commitments that directly benefit Lockheed's Missiles and Fire Control segment ($3.65 billion in Q1 2026 revenue). Geopolitical flashpoints — including U.S.-Iran tensions in June 2026 — reinforce the political durability of elevated defense budgets regardless of administration.
Bearish
- Revenue growth is essentially zero: Q1 2026 revenue of $18.02 billion grew just 0.32% year-over-year, following $20.33 billion in Q4 2025, $18.61 billion in Q3 2025, and $18.16 billion in Q2 2025 — a multi-quarter pattern of oscillation in the $18-20 billion range with no acceleration. A 3.2x book-to-bill is meaningless if backlog conversion into revenue remains this slow, and the market is clearly pricing that risk.
- Margins remain below year-ago levels: Q1 2026 gross margin of 11.53% is well below the 12.93% posted in Q1 2025, and net margin of 8.26% trails the 9.53% from a year ago. While the 11.53% gross margin is a sharp recovery from the Q2 2025 trough of 4.04%, the fact that margins have not returned to prior-year levels suggests structural cost pressure — likely from fixed-price development programs — rather than a temporary blip.
- Leverage is extreme with thin liquidity: Debt-to-equity of 3.23x and total debt-to-capitalization of 76.4% leave little balance-sheet cushion, while the current ratio of 1.09 is barely above 1.0. The 74.65% ROE is flattered by this leverage rather than reflecting operational excellence, and any revenue or margin disappointment could quickly pressure the capital structure.
- Q1 free cash flow was negative: Q1 2026 free cash flow was -$291 million, with operating cash flow of just $220 million against $511 million of capex and $816 million of dividends paid. The -$3.52 billion other working capital drag in Q1 2026 highlights how seasonal swings can create real liquidity strain, and the company depends on back-half cash generation to fund shareholder returns.
LMT Technical Analysis
Lockheed Martin is in a choppy, range-bound consolidation rather than a clean trend, with a 1-year price change of +7.27% that masks significant internal volatility. At a current price of $519.56, the stock sits at roughly 47% of its 52-week range (52-week low of $437.25, high of $692.00), meaning it is trading in the lower-middle portion of its annual band — closer to the low than the high, which suggests neither momentum-chasing nor deep-value territory but rather a market that has lost conviction. The 6-month change of -15.63% versus the 1-year gain of +7.27% confirms that most of the past year's advance came in the earlier period, and the stock has since given back a substantial portion of those gains. Recent momentum is clearly negative and decelerating: the 1-month change of -8.14% and 3-month change of +2.40% show a sharp reversal from the mid-summer rally, and the 1-month relative strength versus SPY of -8.83 percentage points (SPY +0.69% over the same period) signals meaningful underperformance. This divergence — a positive 1-year trend undermined by a negative 1-month trend — typically signals either a temporary pullback within a longer uptrend or the early stages of a trend reversal, and the fact that the 6-month figure (-15.63%) is far worse than the 1-year figure argues that the intermediate trend has already broken down. Key technical levels are well defined: support sits at the 52-week low of $437.25, roughly 16% below the current price, while resistance is the 52-week high of $692.00, about 33% above. A breakout above $692 would confirm a new leg higher and validate the defense-spending thesis, whereas a breakdown below $437 would signal that the market is discounting program or margin risk; notably, the stock's beta of just 0.104 means it is roughly 90% less volatile than the broader market, so moves of this magnitude are significant for LMT and position sizing should account for its unusually low systematic risk. The maximum drawdown of -27.35% over the period further illustrates that even this low-beta name is capable of substantial peak-to-trough declines.
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
+1.2%
Cumulative gain past year
| Period | LMT Return | S&P 500 |
|---|---|---|
| 1m | -4.9% | +0.6% |
| 3m | -7.4% | +3.3% |
| 6m | -18.8% | +17.4% |
| 1y | +1.2% | +15.0% |
| ytd | +1.7% | +12.9% |
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LMT Fundamental Analysis
Lockheed's revenue trajectory is essentially flat, which is the central tension in the fundamental story: the most recent quarter (Q1 2026, ended 2026-03-29) delivered revenue of $18.02 billion with year-over-year growth of just 0.32%, following $20.33 billion in Q4 2025, $18.61 billion in Q3 2025, and $18.16 billion in Q2 2025. The multi-quarter trend shows no meaningful acceleration — revenue has oscillated in the $18-20 billion range for over a year — even as the company reports a record backlog and a 3.2x book-to-bill ratio, implying that backlog conversion into revenue is the key swing factor to watch. Segment data for the most recent period shows Aeronautics at $6.95 billion (the largest contributor, driven by F-35), Missiles and Fire Control at $3.65 billion, Rotary and Mission Systems at $3.99 billion, and Space at $3.43 billion, a diversified mix where Aeronautics remains the dominant growth engine and any F-35 program disruption would be disproportionately impactful. Profitability has been volatile but is recovering: Q1 2026 net income was $1.49 billion on a gross margin of 11.53% and net margin of 8.26%, a sharp improvement from the Q2 2025 trough when net income collapsed to $342 million on a gross margin of just 4.04% and net margin of 1.88%. The Q3 2025 quarter showed gross margin of 12.04% and net margin of 8.70%, and Q1 2025 posted 12.93% gross margin and 9.53% net margin, so the current 11.53% gross margin is below the year-ago level but well above the mid-2025 trough — margins are stabilizing rather than clearly expanding. The balance sheet carries meaningful leverage: debt-to-equity stands at 3.23x (with total debt to capitalization of 76.4% in the Q4 2025 historical data), the current ratio is a thin 1.09, and ROE is an exceptionally high 74.65% — though that ROE is flattered by the leveraged capital structure rather than pure operational excellence. Free cash flow is the bright spot, with TTM free cash flow of $5.66 billion, but the quarterly pattern is lumpy and concerning: Q1 2026 free cash flow was -$291 million (operating cash flow of just $220 million against $511 million of capex and $816 million of dividends paid), versus +$2.76 billion in Q4 2025 and +$3.35 billion in Q3 2025. This seasonality means the company depends on back-half cash generation to fund its dividend (payout ratio of 62.4%, dividend yield of 2.80%) and buybacks, and the negative Q1 FCF print underscores that working-capital swings — particularly the -$3.52 billion other working capital drag in Q1 2026 — can create real liquidity strain within a single quarter.
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 Lockheed Martin is solidly profitable — Q1 2026 net income of $1.49 billion and trailing EPS of $0.045 (reflecting a data anomaly in the key metrics feed) — the PE ratio is the appropriate primary metric, and the trailing PE of 22.43x versus a forward PE of 15.86x implies the market expects meaningful earnings growth ahead. That 29% compression from trailing to forward multiple is the single most important valuation signal in the dataset: it tells us analysts are modeling a substantial EPS recovery (consensus estimated EPS of $40.60), consistent with the Q2 2026 earnings beat narrative of 444% profit growth and a 3.2x book-to-bill ratio. The gap between trailing and forward PE is wide by defense-sector standards and suggests the market is pricing in a normalization of margins from the depressed mid-2025 levels rather than structural deterioration. On peer comparison, Lockheed's PS ratio of 1.49x and EV/Sales of 1.79x look modest in absolute terms, but its EV/EBITDA of 16.67x and PB ratio of 16.62x are elevated — the PB is particularly striking given the company's thin book equity from years of buybacks and leverage. Against a typical aerospace and defense peer set where EV/EBITDA often ranges in the 12-15x band, LMT's 16.67x represents a premium of roughly 11-39% depending on the specific comp, which is arguably justified by its F-35 franchise and backlog visibility but leaves little room for execution error. The gross margin of 10.15% and operating margin of 10.30% are structurally lower than many defense peers, so the premium multiple rests on program durability and cash flow rather than margin superiority. Historically, Lockheed's PE has ranged from roughly 11.8x (Q4 2021) to 90.4x (Q2 2022, distorted by an earnings trough), with more normal readings in the 15-23x band across 2023-2026; the current trailing PE of 22.43x sits near the upper end of that normalized range, while the forward PE of 15.86x sits near the lower end. This bifurcation means the stock is expensive on trailing earnings but cheap on forward earnings — a classic setup where the market is either correctly anticipating a strong recovery or setting up for disappointment if the earnings rebound fails to materialize. The PS ratio of 1.49x is notably below the 5.5-8.1x range seen in the historical ratios data, though that discrepancy likely reflects a data-source inconsistency in share count or revenue basis rather than a genuine valuation collapse.
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
Lockheed's financial risk profile is dominated by its leveraged balance sheet and lumpy cash generation. Debt-to-equity of 3.23x and total debt-to-capitalization of 76.4% mean the company carries substantial fixed obligations — Q1 2026 interest expense alone was $269 million — leaving limited flexibility if revenue or margins disappoint. The current ratio of 1.09 provides almost no liquidity cushion, and Q1 2026 free cash flow of -$291 million (operating cash flow of $220 million against $511 million capex and $816 million dividends) demonstrates that a single quarter of working-capital strain can force the company to lean on its revolver or delay buybacks. Revenue concentration compounds this: Aeronautics at $6.95 billion is the largest segment and derives upward of two-thirds of its revenue from the F-35, so any program disruption — a production slowdown, a cost overrun on a fixed-price contract, or a political decision to trim F-35 orders — would disproportionately impact the entire company. The Q2 2025 earnings collapse (net income of $342 million, 1.88% net margin) is a recent reminder of how quickly profitability can deteriorate when program charges hit.
Market and competitive risks center on valuation compression and the stock's unusual positioning as a low-beta name in a high-beta market. LMT's beta of 0.104 means it is roughly 90% less volatile than the broader market, which historically makes it a defensive holding — but that also means the stock has missed much of the 2026 market rally, as evidenced by the -37.28 percentage point 6-month relative strength versus SPY. If the market continues to favor growth and momentum, LMT could remain a source of funds for portfolio managers, perpetuating the underperformance. On the competitive front, Rocket Lab's $397 million Space Force contract (August 2026) and Boeing's USAF satellite orders (July 2026) highlight that adjacent players are winning meaningful defense work, and while neither directly threatens the F-35 franchise, they signal that the Pentagon is actively diversifying its supplier base. Regulatory and political risk is also non-trivial: defense budgets are set annually, and a shift in congressional priorities — for example, toward smaller, cheaper systems or space-based assets — could redirect funding away from Lockheed's high-end platform programs. The EV/EBITDA of 16.67x represents an 11-39% premium to the typical 12-15x aerospace and defense peer band, leaving little room for execution error.
The worst-case scenario for Lockheed would be a combination of slow backlog conversion, a new F-35 program charge, and a broader market rotation away from defense stocks. In that chain of events, revenue growth stays below 1%, gross margin fails to recover above 12%, and the forward EPS estimate of $40.60 proves too optimistic — forcing analysts to cut targets and the stock to re-rate toward the low end of its historical PE band. Quantitatively, the 52-week low of $437.25 represents a -15.8% decline from the current $519.56, and the analyst low target of $503.00 implies -3.2% downside; a more severe scenario that combines an earnings miss with multiple compression could push the stock toward the $437 support level, a loss of roughly 16% from current prices. The maximum drawdown of -27.35% over the past year shows that even this low-beta name is capable of substantial peak-to-trough declines, and in a true worst case — where the F-35 program faces a funding cut and the $1.5 trillion defense budget proposal stalls — the stock could revisit the 2024 lows in the $400-420 range, representing a 19-23% loss from current levels.
FAQ
The most severe risk is revenue stagnation: Q1 2026 revenue grew just 0.32% year-over-year, and if backlog conversion remains slow, the forward EPS estimate of $40.60 will prove too optimistic, forcing analysts to cut targets and compress the forward PE. The second risk is balance-sheet fragility: debt-to-equity of 3.23x, a current ratio of 1.09, and Q1 2026 free cash flow of -$291 million leave little cushion if margins deteriorate or working capital swings worsen. The third risk is program concentration: Aeronautics at $6.95 billion derives two-thirds of its revenue from the F-35, so any program charge, production slowdown, or political decision to trim orders would disproportionately impact the entire company — the Q2 2025 earnings collapse to $342 million net income is a recent reminder. The fourth risk is market underperformance: LMT has lagged SPY by 37.28 percentage points over the past 6 months, and continued rotation into growth sectors could perpetuate the underperformance even if fundamentals improve.
The 12-month forecast is divided into three scenarios: a base case (50% probability) with a target range of $580-640, assuming modest revenue growth of 1-2% and gross margin stabilizing at 11.5-12.0%; a bull case (25% probability) with a target range of $692-756, assuming successful backlog conversion, revenue growth above 3%, and passage of the $1.5 trillion defense budget; and a bear case (25% probability) with a target range of $437-503, assuming revenue stagnation, a new F-35 program charge, and congressional trimming of defense spending. The base case is most likely, anchored by the analyst average target of $637.84 and the forward PE of 15.86x, which assumes the company meets the consensus EPS estimate of $40.60. The key assumption behind the base case is that backlog conversion proceeds gradually without a major program charge, allowing the stock to trade in a range between the current price and the analyst average target.
LMT's valuation is bifurcated: the trailing PE of 22.43x is near the high end of its 15-23x historical band, suggesting the stock is expensive on past earnings, but the forward PE of 15.86x is near the low end, implying the market expects a substantial EPS recovery to $40.60. The EV/EBITDA of 16.67x represents an 11-39% premium to the typical 12-15x aerospace and defense peer band, which is arguably justified by the F-35 franchise and record backlog but leaves little room for execution error. The PS ratio of 1.49x and EV/Sales of 1.79x look modest in absolute terms, but the PB ratio of 16.62x is elevated due to thin book equity from years of buybacks and leverage. On balance, the stock appears fairly valued to slightly undervalued relative to its forward earnings power, but expensive relative to its trailing results — the market is paying today for a recovery that has not yet appeared in the revenue line.
From a risk-reward perspective, LMT is a reasonable buy for patient, income-oriented investors but not a compelling near-term trade. The analyst average target of $637.84 implies 22.8% upside, while the low target of $503.00 is only 3.2% below the current price of $519.56, creating an asymmetric setup where downside appears limited. However, the stock has underperformed SPY by 9.95 percentage points over the past year, and revenue growth of 0.32% shows the backlog-driven recovery has not yet materialized. The 2.80% dividend yield and beta of 0.104 make it a defensive holding, but investors should be prepared to wait 12-18 months for the earnings recovery to validate the forward PE of 15.86x. It is a good buy for those seeking defense-sector exposure with limited volatility, but not for those seeking immediate capital appreciation.
LMT is best suited for long-term investment, with a suggested minimum holding period of 18-24 months. The stock's beta of 0.104 means it is roughly 90% less volatile than the broader market, making it a poor candidate for short-term trading — the 1-month change of -8.14% shows that even low-beta names can experience sharp moves, but the lack of daily volatility reduces trading opportunities. The 2.80% dividend yield and 62.4% payout ratio provide a steady income stream that rewards patient holding, while the backlog-driven earnings recovery is a 2027-2028 story that requires time to unfold. Earnings visibility is moderate: the 3.2x book-to-bill ratio provides confidence in future revenue, but the timing of backlog conversion is uncertain, and the Q2 2025 earnings collapse shows that quarterly results can be volatile. Short-term traders should look elsewhere for higher-volatility opportunities, while long-term investors can accumulate on weakness toward the $480-500 range and hold through the defense spending cycle.