- Price
- $531.88
- Fair value
- $650.00
- Discount
- 18.2%
- Uncertainty
- Medium
- LSEG rating
- 2.35
- Moat
- Wide
- Next earnings
- 2026-10-22
- Next earnings is estimate
- No
- Company name
- Lockheed Martin
- Sector
- Aerospace & defense
- About
- Lockheed Martin is the largest US defense contractor. It reports four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. Aeronautics builds the F-35 fighter jet, its largest program, which gave about 28% of total sales in Q2 2026. Missiles and Fire Control makes the PAC-3 and THAAD interceptors and other missiles. Rotary and Mission Systems includes Sikorsky helicopters and the Aegis combat system, and Space builds satellites, the Orion capsule and the Navy's ballistic missiles. Most sales go to the US government, and the rest go to allied governments, often through US foreign military sales. Lockheed Martin makes money on fixed-price and cost-reimbursable contracts; cost-reimbursable contracts gave about 41% of sales in the first half of 2026. Its backlog was a record $230 billion at June 28, 2026.
- Thesis
- The market discounts Lockheed Martin because two things are not certain: how much the US government will pay for its weapons, and how well Lockheed Martin performs on its fixed-price contracts. The US fiscal year 2027 started on October 1, 2026 with a stopgap budget that keeps most defense spending at the 2026 level until December 11, 2026. The stopgap does not let the Pentagon raise production rates or start new multiyear purchases, and the Senate did not approve faster purchases of PAC-3 missiles. This delays the munitions growth that the THAAD and PAC-3 agreements promise. Investors also remember losses of $1.6 billion in Q2 2025 on a classified jet program and two helicopter programs, a $125 million charge on the F-16 in Q1 2026, and negative free cash flow in Q1 2026. A January 2026 executive order threatened dividends and buybacks of defense contractors that are late or over budget, and Lockheed Martin bought back no shares in the first half of 2026. For the gap to close, Congress must pass a full-year 2027 defense budget that funds the higher missile production, Lockheed Martin must report no new large program losses, and free cash flow must reach the 2026 guidance of $7.0 billion to $7.2 billion. The Ultra Maritime purchase must also close in Q4 2026 as planned. The evidence comes with the Q3 2026 report on October 22, 2026, the end of the stopgap on December 11, 2026, and the full-year 2026 report in late January 2027. If the budget passes and the programs stay on cost, the gap can close over the next four to six quarters. The main risk is a long stopgap or a new program charge.
- Risks
- Lockheed Martin depends on the US budget. A stopgap funds the Pentagon at the 2026 level until December 11, 2026, and it does not let the Pentagon raise production rates or start new multiyear contracts. If Congress uses stopgaps for a long time, the munitions growth and new programs come later.
Fixed-price contracts move cost overruns to Lockheed Martin. It recorded $1.6 billion of losses in Q2 2025 on a classified Aeronautics program and two helicopter programs, and a $125 million charge on the F-16 in Q1 2026. A shareholder class action, amended in January 2026, alleges misstatements about these programs. New charges can come without warning.
The F-35 gave about 28% of sales in Q2 2026. Deliveries fell to 19 jets in Q2 2026 from 50 a year earlier. A cut in orders from the US or its allies, or more delays, would lower sales and cash flow.
A January 2026 executive order threatens dividends and buybacks of defense contractors that are late or over budget. Lockheed Martin made no buybacks in the first half of 2026, and its 10-Q names presidential executive orders as a risk to its buybacks and dividends.
The $3.45 billion Ultra Maritime purchase needs regulatory approvals and new financing, and it adds integration work.
- Balance sheet
- Cash: $3.8B
Debt: $21.7B
Net debt: $17.9B
EBITDA, last 12 months: $10.8B
Net debt / EBITDA: 1.7× (low)
Interest cover: 8.5×
Debt due within 12 months: $0.0M
Lockheed Martin funds itself with unsecured notes of the parent company and with cash from operations. At June 28, 2026, the principal of its debt was $21.7 billion; the balance sheet shows $20.5 billion net of $1.2 billion of discounts and issuance costs. No debt was due within one year, because it repaid $1.2 billion of notes in the first half of 2026. It had no commercial paper and no borrowings under its credit facilities at that date. EBITDA is operating profit plus depreciation and amortization for the 12 months to June 28, 2026. Interest cover is operating profit divided by interest expense for the first half of 2026. On August 24, 2026, it signed a new $2.25 billion 364-day credit facility and extended its $3.0 billion facility to August 2031. Total stockholders' equity was only $8.8 billion, because of past buybacks and pension losses. Accrued pension liabilities were $3.9 billion. Lockheed Martin plans to pay $3.45 billion for Ultra Maritime with cash on hand and new financing, which will raise debt when the deal closes. In the first half of 2026, dividends used $1.6 billion, and it bought back no shares.
As of 2026-06-28.
- Checkpoints
- Oct 22, 2026: Q3 2026 results: program charges and free cash flow. Pending. Watch: No new large program loss and 2026 free cash flow guidance of at least $7.0 billion pass; a new reach-forward loss or a cut to the cash guidance fails.
Dec 11, 2026: End of the US stopgap budget. Pending. Watch: A full-year 2027 defense budget that funds higher missile production passes; another stopgap that keeps the 2026 level into 2027 fails.
Q4 2026 (estimate): Ultra Maritime purchase closes. Pending. Watch: Closing in Q4 2026 with the regulatory approvals passes; a delay into 2027 or a block fails.
- Recent events
- 2026-10-14: Bernstein cut its price target to $564 because of possible delays in the US defense budget. On the same day, Vertical Research started coverage with a Buy rating and a $600 target. It said that funding for air defense missiles looks secure.
2026-10-13: Lockheed Martin and Avio signed a cooperation agreement for solid rocket motors. Avio's US unit will make motors for the Extended Range GMLRS and the Precision Strike Missile at its plant in Hurt, Virginia, after qualification. This gives Lockheed Martin a second source of motors.
2026-09-02: The US President signed a stopgap budget that funds the government through December 11, 2026. Most defense programs stay at the 2026 level. The stopgap does not let the Pentagon raise production rates or start new multiyear contracts, and it did not include faster purchases of PAC-3 missiles.
2026-08-24: Lockheed Martin signed a new $2.25 billion 364-day revolving credit facility. It also extended its $3.0 billion five-year revolving credit facility by one year, to August 24, 2031.
2026-07-23: Lockheed Martin reported Q2 2026 results. Sales were $20.1 billion, up 11%, and earnings per share were $7.94. Free cash flow was $2.9 billion, and new orders of $65 billion took the backlog to a record $230 billion. It raised its 2026 guidance to sales of about $79.75 billion to $81.75 billion and free cash flow of about $7.0 billion to $7.2 billion. It delivered 19 F-35 jets in the quarter, against 50 a year earlier.
2026-07-06: Lockheed Martin agreed to buy Ultra Maritime, a maker of undersea warfare and anti-submarine systems, for $3.45 billion. It will pay with cash on hand and new financing. It expects the deal to close in Q4 2026, after regulatory approvals.
2026-06-24: The Missile Defense Agency gave Lockheed Martin a multiyear contract for THAAD interceptors with a value of about $35.3 billion. The work runs from March 2026 to June 2032, and $843 million of 2026 funds were obligated at award.
2026-04-23: Lockheed Martin reported Q1 2026 results. Sales were $18.0 billion, flat from a year earlier, and earnings per share fell to $6.44 from $7.28. Free cash flow was negative $291 million. A $125 million charge on the F-16 program lowered profit.