Aerospace & Defense · Outside the Retail 100

Lockheed

LMT

Our rating: hold
12-month target: $682.69 +6.8%
Expected vs. S&P 500: -9.5 ptsSee the math
Next earnings: Jan 26In 82 days

The 850-jet F-35 deal that helped lift Lockheed's stock has no price or funding yet, and Lockheed's spending on the next batch already exceeds what the Pentagon authorized.

Summary

Lockheed makes the F-35 fighter, missiles, helicopters, radars and space systems, almost all for governments. Missiles are the growth: the unit's backlog tripled this year to $142.5B as seven-year interceptor deals, agreed in January and made urgent by the Iran war, became contracts. The F-35 still sets the profit, while the helicopter, radar and space units grow slowly. The stock rose about 23% in a month, most of it after results and a 10-year F-35 framework Congress has not funded, so we think the good news is priced in.

$639.00

+$133.10 (+26.31%)Past year

What Lockheed does

Lockheed builds the F-35, the stealth fighter the U.S. and 19 allies have committed to buy, plus PAC-3 and THAAD interceptors. Boeing won both next U.S. fighters, so the F-35 is Lockheed's fighter future.^{1,3,4,2,19,18,16}

What it sells

Aeronautics40% of revenue, first nine months of 2026
The F-35, plus F-16, C-130J and F-22 work. 2025's record 191 F-35 deliveries included stored jets; Boeing's two new fighters are still in development.
Rotary and Mission Systems22% of revenue, first nine months of 2026
Sikorsky helicopters, Aegis ship defense systems and radars. Growing only low single digits this year after $665M of helicopter contract losses in 2025.
Missiles and Fire Control21% of revenue, first nine months of 2026
PAC-3 and THAAD interceptors, GMLRS rockets and JASSM/LRASM cruise missiles. The fastest grower: sales rose 24% last quarter as interceptor and rocket production ramps.
Space18% of revenue, first nine months of 2026
Trident submarine missiles, the Next Generation Interceptor for homeland defense, satellites and NASA's Orion capsule. Steady, with 7% to 8% growth expected this year.

Who buys it

The U.S. government is 70% of sales this year, 61% from the Pentagon. Foreign governments are 30%, mostly bought through the Pentagon. One customer and one program set the profit: the F-35 is 27% of sales.

Where you've seen it

Black Hawk helicopters on the news are built by its Sikorsky unit; NASA's Orion moon capsule is Lockheed's too.

How it got this way

The F-35 franchise dates to Oct. 26, 2001, when Lockheed's X-35 beat Boeing's X-32 for the Joint Strike Fighter, then called the largest contract in Pentagon history. One airframe had to serve the Air Force, Navy and Marines, including a version that lands vertically. Lockheed's lift fan did that in the same configuration it flew supersonic; Boeing's design overheated its own engine with recirculated exhaust.^20,21

What the Pentagon buys

The F-35 is three businesses: building jets, keeping them flying, and upgrading them, and most of the plane is outsourced

Each year's jets are bought as a production lot, a contract for that batch. Every jet delivered then needs parts, logistics and training for decades, which Lockheed sells as sustainment. A third stream pays for upgrades, such as TR-3, new computer hardware and software, and the later Block 4 weapons package.

Lockheed is the prime contractor, but more than 60% of the jet comes from suppliers. Northrop Grumman builds the center fuselage and BAE Systems the rear. That is why the long contract matters: Taiclet says supplier delays and quality are among Lockheed's biggest costs.

Sustainment is where the fleet's weakness shows. The share of F-35s able to fly at least one mission fell from 67% in fiscal 2021 to 44% in 2025, and the program chief told senators the fleet had outgrown its support system. That hurts the customer, and it gives Lockheed more support work to sell.^{1,2,3,4,6,14,15,16,18,19}

Share of Lockheed sales: 27%
Jets delivered since inception: 1,387
U.S. program of record: 2,456 jets

Stream	What the customer pays for	Where it stands
Production	Lots of new jets, about 156 a year including allies.	274 jets in backlog; Lot 20 unsigned.
Sustainment	Parts, logistics and training for about 1,375 fielded jets.	Management's main growth driver for Aeronautics.
Upgrades	TR-3 hardware and software, then Block 4 weapons.	No combat-capable TR-3 jets in the last test report.
Rivals	Boeing's F-47 and F/A-XX next-generation fighters.	F-47 replaces the F-22; F/A-XX flies alongside the F-35C.

Where we landThe franchise is safe for a decade, and service, not new jets, is where it grows. The weak spot is upgrades: TR-3 jets are still limited to training, and the Pentagon withheld part of each jet's payment over the delay.

The interceptor factory

Lockheed's missile unit earns better margins than the F-35, and the ramp depends on suppliers including Boeing and Northrop

Missiles and Fire Control makes PAC-3 and THAAD interceptors, which hit incoming ballistic missiles directly, plus GMLRS rockets, PrSM and JASSM/LRASM cruise missiles. Its margin was 14.0% last quarter, against 9.0% at Aeronautics, so each dollar of missile growth adds more profit than a dollar of F-35 growth.

The bottleneck is parts, not orders. For PAC-3 alone, Lockheed placed $14.7B with Boeing to triple seeker output, $4.7B with L3Harris for rocket motors and $1.6B with Northrop. It added GM Defense as a supplier and is growing its Camden, Arkansas plant's workforce by about half.

RTX is the closest comparison. Its Raytheon unit turned Tomahawk and AMRAAM frameworks into multiyear contracts last quarter and grew sales 14%, against Lockheed's 24% in missiles. Both are paid to ramp; Lockheed's lead is specific to PAC-3 and THAAD.^1,2,17,25

Missile unit backlog: $142.5B
Operating margin, Q3: 14.0%
Largest supplier award: $14.7B

Program	What it does	Status
PAC-3 MSE	Patriot's hit-to-kill interceptor against ballistic missiles.	Seven-year contract up to $58.6B; output from about 600 a year toward 2,000.
THAAD	Intercepts ballistic missiles at higher altitude.	Seven-year contract signed earlier in 2026.
GMLRS and PrSM	Army rockets and long-range strike missiles.	PrSM Increment 2 won a $1.2B production contract.
JASSM and LRASM	Air-launched cruise and anti-ship missiles.	New awards booked last quarter.

Where we landThis is the best business Lockheed owns right now, and it is under contract for years. The risk is execution through a supply chain that includes two rivals. A slip in seeker or motor deliveries would show up first in missile sales growth.

How the business makes money

The backstory

Lockheed's recent problem was execution: the Pentagon stopped accepting F-35s for a year from July 2023 over a delayed upgrade, and two classified programs with fixed-price terms cost about $3.3B in losses. In January 2026 the Pentagon began agreeing seven-year interceptor deals, and the Iran war from February drained the stockpiles they refill. CEO Jim Taiclet's answer is long contracts with price escalators, more than $9B of investment through 2030, mostly in munitions, and a steady 156 F-35s a year.

Lockheed turns long government contracts into steady deliveries. Missiles now drive growth, the F-35 drives profit and service revenue, and the cash funds factories and a rising dividend.^{1,2,3,4,5,14,17,24,30,31,6,32}

1 · DemandDepleted stockpilesThe Iran war drained Patriot and THAAD stocks. The Pentagon wants PAC-3 output to rise from about 600 a year to about 2,000.
2 · VisibilityMultiyear contractsSeven-year PAC-3 and THAAD contracts replace yearly orders. That pushed backlog to a record $292B.
3 · InvestmentNew capacityLockheed is adding 2 million square feet across eight sites. Management says the government covers the cash during the ramp.
4 · Profit engineF-35 productionThe F-35 is 27% of sales. Management says production now lifts Aeronautics margins.
5 · AnnuityF-35 sustainmentEvery jet delivered needs decades of parts and support. About 1,375 are flying, and management calls sustainment Aeronautics' main growth driver.
6 · PayoutDividendThe quarterly dividend rose to $3.60, the 24th yearly increase. No buybacks this year; Lockheed hasn't said why, though a January executive order restricts them.

Advantages

The only Western fighter line at full rate

Major advantage

Lockheed wins because the F-35 is the fighter the U.S. and its allies already chose. Over 1,375 F-35s are flying, each needing decades of parts and upgrades. The edge is durable through Lot 30 but stops there: Boeing won both next-generation U.S. fighters, which are still in development.

1.Won the harder design. In 2001 Lockheed's lift-fan X-35 beat Boeing's X-32, whose vertical landings overheated its engine. One airframe for three services became a program now worth 27% of Lockheed's sales.
2.Scale rivals lack. Lockheed can build 156 jets a year. It delivered a record 191 in 2025, but many had sat in storage; 2026 deliveries were 94 through September.
3.Paid again on service. The framework adds ten years of sustainment and upgrade kits. Management calls sustainment the main pacing item for Aeronautics growth.
4.Durable, not growing. Boeing won the F-47 in 2025 and the Navy's F/A-XX in September. No combat-capable TR-3 jets were delivered through fiscal 2025, and GAO put mission-capable rates at 44%.^{4,5,6,7,15,16,18,19,20,21,2}

Interceptors the war used up

Strong advantage

Lockheed makes PAC-3 and THAAD, the hit-to-kill interceptors the Iran war drained, and now has seven-year contracts for both. PAC-3 alone is worth up to $58.6B, with output meant to roughly triple. RTX builds the Patriot radar and launcher and the Standard Missile, and signed long deals for Tomahawk and AMRAAM, so Lockheed's edge is specific to these two interceptors.^{1,2,3,17,25,30}

Contracts that shift risk back

Supporting

The new deals start from a price set under the old cost-plus rules, rise each year with an industry inflation index, and let Lockheed keep savings from automation. They also repay investment if Congress later cuts volumes. These are management's descriptions; profit terms are still being negotiated.²

What's changing

From yearly orders to ten-year deals, not yet funded

In 2026 Lockheed signed seven-year contracts for PAC-3 and THAAD, and on Oct. 22 a 10-year F-35 framework for at least 850 U.S. jets. Backlog rose 27% in one quarter. But the F-35 deal needs multiyear authority and appropriations from Congress, and the government runs on a stopgap through Dec. 11 that bars new multiyear buys.^1,3,5,6

Competitors

Who else an investor would consider, and how they compare.

Company	Market value	What it does	Compared with Lockheed Martin
Lockheed Martinthis stock	$147.66B	Lockheed builds the F-35, the stealth fighter the U.S. and 19 allies have committed to buy, plus PAC-3 and THAAD interceptors. Boeing won both next U.S. fighters, so the F-35 is Lockheed's fighter future.
RTXRTX	—	Raytheon missiles plus Pratt & Whitney engines and Collins aircraft parts.	RTX's backlog is about half commercial aerospace; Lockheed's sales are 70% U.S. government.^25,3
Northrop GrummanNOC	—	B-21 bomber, Sentinel nuclear missile and space systems; a major F-35 supplier.	Northrop earns from F-35 work without carrying the prime contract's risk.^26,2
BoeingBA	—	Airliners, plus a defense unit building the F-47 and F/A-XX fighters.	Boeing holds the next U.S. fighters; Lockheed holds the one in production.^28,18,19
General DynamicsGD	—	Navy submarines, combat vehicles and Gulfstream business jets.	General Dynamics grows on submarines; Lockheed grows on missiles and interceptors.²⁷

Bull vs. bear: two bets on the same stock

1
A share is a small slice of the company. Its value comes from the profits the company will make in the future.
2
Nobody knows those profits yet. Buyers (bulls) pay today's price betting they'll beat what most people expect. Sellers (bears) bet they'll fall short.
3
When results come in, the price moves toward whichever side was right, and that side makes money.

The question they disagree on

Will Congress fund the F-35 and missile deals in time for Lockheed to earn the $33.30 a share analysts expect for 2027, about 9% above 2026?^{1,2,3,6,10,22,23,30,31}

Bull case: why buyers buy

If Congress grants multiyear F-35 authority and funds the missile deals after the midterms, Lot 20 signs, missiles keep growing about 20%, and 2027 earnings beat.

Missiles have years of signed work. The unit's $142.5B backlog is more than eight years of this year's expected sales.
Lot 20 is not in guidance. The CFO says signing it this year would lift every 2026 metric; guidance assumes it slips to 2027.
The new contracts protect cash. Management says the munitions deals cover its investment costs during the ramp and repay it if volumes are later cut.
Big write-offs have stopped. Lockheed booked no new reach-forward losses (charges for contracts expected to lose money) this year, after $1.6B in 2025 on a classified jet and two helicopters.

Bear case: why sellers sell

If Congress stalls past the Dec. 11 stopgap, the F-35 deal stays a press release, Lockheed keeps funding Lot 20 itself, and a stock above its usual valuation drifts lower.

The money is not appropriated. The Senate delayed its defense policy bill until after the midterms, and the stopgap bars new multiyear buys.
Lockheed is spending ahead of contracts. Its costs on the Lot 20 advance contract now exceed what the government authorized and funded, and Aeronautics trimmed its 2026 profit outlook.
Most of the business grows slowly. Rotary and Mission Systems and Space, 40% of sales, grew 3% and 4% last quarter.
Cash for shareholders is capped. Lockheed has bought back no stock this year, is paying cash for Ultra Maritime, and owes a pension payment above $1B in 2027.

Where Delphi landsholdWe think today's price already weighs both sides fairly.See why

The unsigned F-35 deal

The 850-jet framework sets volume and terms, but no price, no money and no contract yet

The Oct. 22 framework covers Lots 21 to 30 at 156 jets a year, with at least 850 for the U.S., about 85 a year. That matches the Pentagon's 2027 request. Congress funded only 47 in 2026, so the framework bets that the U.S. buy nearly doubles and stays there.

It is not a contract. Pricing and schedules come in a formal award once Congress grants multiyear authority and funds it. Both chambers' defense policy bills allow it, but the Senate delayed its version until after the midterms, and the stopgap through Dec. 11 bars new multiyear buys.

Lot 20, the next lot, sits outside the framework and is unsigned. Lockheed's costs on its advance contract, which buys long-lead parts, now exceed what the government authorized. Lockheed does not say by how much. Contract assets, work done but not yet billed, rose $3.9B this year, mainly on the F-35 and tactical missiles.

The scale is large. The F-35 is 27% of sales, roughly $22B at this year's guidance midpoint by our arithmetic. Lockheed also agreed to invest at least $7B of its own money in the program.^1,2,3,5,6,7

U.S. jets in framework: 850 over 10 years
U.S. F-35s funded, 2026: 47
Unbilled work added this year: $3.9B
Lockheed's own investment: At least $7B

Where we landIt matters for timing, not survival. The demand is real and both defense bills allow the deal, but the stock has already priced it. We'd turn buyers once Congress funds it and Lot 20 signs at today's margins.

What to watch

The numbers that will settle the debate.

Missiles and Fire Control sales growth▲ improving

+24% last quarter to $4.5B; backlog $142.5B, up from $46.7B at the start of 2026^1,2

The growth engine. Management targets mid-teens yearly growth for five years; about 20% is expected this year.

F-35 Lot 20 contract and multiyear funding■ unclear

Unsigned; Lot 20 costs now exceed authorized funding; Senate defense bill delayed past midterms^1,6

Until signed, Lockheed funds work itself. Signing would add upside to 2026 and 2027.

Rotary and Mission Systems plus Space growth■ flat

RMS +3% and Space +4% last quarter; 2026 guidance low single digits and 7–8%^1,2

These are 40% of sales. High single-digit company growth in 2027 needs them faster.

Next earnings report

Jan 26

In 82 days

Expected earnings per share: $8.35
Expected revenue: $22.64B

What to listen for: The first 2027 guidance: whether it includes Lot 20 and multiyear F-35 funding, and how much the pension payment cuts free cash flow.^2,10

What would prove this wrong

✕Congress passes multiyear F-35 authority and full-year funding by January.
✕Lot 20 is signed with margins at or above recent lots.
✕A new classified-program or F-35 reach-forward loss appears.
✕The lame-duck Congress drops munitions money from any reconciliation bill.

Our ratingHoldas of Nov 3 close, $639.00 · what ratings mean

We agree with consensus, but at 19 times earnings, near the top of its five-year range, the model gains about 7% plus a 2% dividend, trailing the S&P 500.

12-month target: $682.69 (+6.8%)
Plus dividend: +2.1%
S&P 500, same method, with dividends: +18.5%
Expected vs the market: -9.5 points

The math behind the recommendation

Three 12-month price scenarios, weighted by probability, compared with the S&P 500 under the same method.

Now $639.00

Target $682.69

bull case25% likely

$823.33 +29%

Congress funds the F-35 multiyear and munitions deals in the lame duck, Lot 20 signs, and 2028 earnings land near the top of forecasts.

$36.57 earnings per share × 22.5 = $823.33

base case50% likely

$668.11 +5%

Funding arrives in pieces through 2027, missiles grow about 20%, the rest grows slowly, and 2028 earnings match the roughly $36 consensus.

$35.41 earnings per share × 18.9 = $668.11

bear case25% likely

$571.19 -11%

Stopgaps continue, the F-35 deal stalls, Lockheed keeps funding Lot 20 itself, and earnings fall toward the low end as the valuation reverts.

$34.33 earnings per share × 16.6 = $571.19

Why these odds: Lockheed beat and raised guidance twice, and 2027 estimates have edged up. But funding depends on a Congress that delayed its defense bill past the midterms, so bull and bear odds are equal.

How the prices are built: Wall Street expects earnings per share of $35.41 for the year starting a year from now (analysts range from $33.24 to $37.73). Today the stock trades at 19.6 times next year's earnings per share; its five-year middle is 16.74.^{8,10,11,12,13}

What tests the call: Q4 2026 earnings (date unconfirmed): first 2027 guidance, Lot 20 status, pension cash (Jan 28)

Buy means expected to beat the S&P 500 by 10+ points over 12 months; Sell means expected to trail it by 10+. Inputs gathered Oct 29; the recommendation updates with the price every day. Model-generated, not personalized investment advice. How ratings work · Track record

What the price assumes

At $639.00, Lockheed is priced about like the average stock

Lockheed trades at 20 times the earnings analysts expect over the next 12 months. That ratio is the multiple: what investors pay today for each dollar of a year's earnings. That is pricier than it has been 80% of the time over the past five years, when the middle was 17.

Analysts expect earnings to grow about 8% the year after, against about 16% for the S&P 500. The S&P 500 trades at 19 times. The price assumes Lockheed's earnings grow roughly in line with forecasts, with no premium for doing better.

Lockheed multiple: 20×
S&P 500 multiple: 19×
Base case: +5%
Bear case: −11%

The skewOur bear case loses about $2.33 for every $1 our base case makes. That ratio, how much you stand to lose against how much you stand to make, is the skew.

What missiles add

Missile growth alone could deliver about half of the earnings increase analysts expect next year

Management guides missile sales of $17.25B to $17.45B this year and mid-teens yearly growth for five years. At 15%, that is about $2.6B more sales in 2027.

At this year's 14.1% margin, that is about $370M of operating profit. After Lockheed's 15% tax rate and about 231.5 million shares, it is roughly $1.35 a share, our arithmetic.

Analysts expect 2027 earnings of $33.30, up $2.66 from 2026. So missiles cover about half the gain on their own. The rest needs the F-35 to grow and the slower units to pick up, which is where Lot 20 and multiyear funding come in.

Cash is tighter than earnings. Management expects a pension contribution above $1B in 2027, against free cash flow guidance of $7.8B to $8.0B this year.^1,2,10

Extra missile sales, 2027: About $2.6B
Earnings per share added: About $1.35
Consensus 2027 EPS gain: $2.66

Where we landMissiles make 2027 consensus look safe, not easy to beat. Upside needs Lot 20 and funded multiyear deals. A pension payment and no buybacks mean earnings growth will not be helped by a shrinking share count.

Last earnings

No reported quarters available.