LMT
Lockheed Martin CorporationThesis. LMT is a pure-play defense execution engine riding a global rearmament cycle — NATO spending commitments, F-35 production boosts, and the $3.45B Ultra Maritime acquisition deepen its moat. Trailing results are muddied by program charges (Q2 2025 gross margin collapsed to 4%), but a 16.7x forward P/E versus 26x trailing prices in normalization. Accumulate into weakness; the stock sits 22.6% below its 52w high with a 0.11 beta and 15% consensus upside.
Scoreboard
At $535.38 LMT carries a $123.4B market cap and $142.2B enterprise value, trading 22.6% below its $692 52w high and 30.5% above the $410.11 low — squarely mid-range (position 0.44). The price sits marginally above the 50-day ($520) but below the 200-day ($541) average, a neutral-to-soft technical posture. Consensus target of $615.74 implies 15% upside, with a wide $511–$756 dispersion reflecting genuine disagreement on program-charge normalization.
QoQ Changes
Q1 2026 revenue of $18.02B fell 11.3% QoQ from $20.32B (seasonal Q4 strength unwinding), while basic EPS rose 11.2% to $6.47 from $5.82 on cleaner program execution. The sequential EPS recovery matters more than the revenue optics — Q4 carried heavier charge absorption.
Operating margin recovered to 11.4% in Q1 2026 ($2.06B on $18.02B) versus a charge-ravaged 4.1% in Q2 2025, when gross profit cratered to $734M. EBITDA margin of ~13.5% in the latest quarter signals the worst of the fixed-price program losses is behind the RMS and Aeronautics segments.
Trailing FCF margin of 5.3% yields a 3.23% FCF yield on enterprise value — adequate but unspectacular for a defense prime. Cash generation remains hostage to working-capital swings on long-cycle contracts and F-35 milestone timing.
Net debt of $18.8B against just $1.89B cash ($8.22/share) and $20.7B total debt drives a stretched 276% debt-to-equity, though covenant risk is negligible given investment-grade status and government-backed receivables. Current ratio of 1.14 and quick ratio of 0.91 are thin but typical for the model.
Forward P/E of 16.7x sits below the S&P and at a discount to the trailing 26.0x, implying the market expects EPS normalization; EV/EBITDA of 17.8x and P/S of 1.64x are mid-cycle for the group. Price-to-book of 16.4x is optically extreme but meaningless given buyback-depleted equity and a 67.6% ROE.
The $3.45B Ultra Maritime acquisition pushes LMT deeper into undersea warfare amid a naval-consolidation wave, while a Rheinmetall MOU to co-produce ATACMS in Europe and F-35 production boosts capture the NATO spending surge. Fresh $143M Pentagon awards (C-5, AEGIS) confirm steady book-and-bill momentum.
Ownership & Insider Activity
Institutions hold 75.9% (State Street 14.1%, BlackRock 7.7%, Vanguard entities ~8.4% combined), a stable index-anchored base. SEC Form 4 data skews net-sell: CFO Timothy Cahill executed eight open-market sales totaling ~4,620 shares (~$3.0M) on 2026-03-11, and Gregory Ulmer sold 2,520 shares on 2026-02-27 — routine post-vesting liquidation, not a red flag. Short interest is benign at 1.68% of float but rising (3.24M vs 2.55M shares prior month, +27%), a modest bearish tick worth monitoring.
Recent Insider Transactions
No recent insider transactions on file.
Earnings Quality
| Period | Actual EPS | Estimate | Surprise | Surprise % |
|---|---|---|---|---|
| 2026-03-31 Q1 | $6.44 | $6.79 | $-0.35 | -5.20% |
| 2025-12-31 Q4 | $7.43 | $5.76 | +$1.67 | +28.99% |
| 2025-09-30 Q3 | $6.95 | $6.42 | +$0.53 | +8.18% |
| 2025-06-30 Q2 | $7.29 | $6.51 | +$0.78 | +12.03% |
Beat consensus in 3 of the last 4 quarters (75% beat rate) with an average +11.0% surprise, headlined by a +29% Q4 2025 blowout — signaling management sandbags guidance around program-charge uncertainty.
The streak broke in Q1 2026 with a -5.2% miss ($6.44 vs $6.79 est), so surprises are narrowing and turning negative — a sign analysts have finally calibrated to the charge-adjusted run-rate rather than a durable deterioration.
Analyst Action
| Month | Distribution | Strong Buy | Buy | Hold | Sell | Strong Sell |
|---|---|---|---|---|---|---|
| 2026-07 | 5 | 6 | 16 | 1 | 0 | |
| 2026-06 | 5 | 6 | 16 | 1 | 0 | |
| 2026-05 | 4 | 7 | 17 | 1 | 0 | |
| 2026-04 | 4 | 7 | 17 | 1 | 0 |
The Finnhub series shows a slow bullish drift: Strong Buy climbed from 4 (April/May) to 5 (June/July) and Hold eased from 17 to 16, while the lone Sell rating persisted — incremental warming, not a wholesale re-rating.
Momentum is mildly bullish, but the Hold-heavy composition (16 of 28) keeps the aggregate rating stuck at 'hold' pending margin proof-points.
Seven Essential Metrics
67.6% ROE flatters a thin equity base; blended EBITDA margin of ~10.6% and 6.4% net margin are depressed by program charges, not structurally weak.
Revenue growth of just 0.3% and earnings growth of -11.5% reflect a mature top line lapping charge headwinds, though backlog underwrites reacceleration.
5.3% FCF margin and 3.23% FCF yield are serviceable but light versus best-in-class primes.
276% debt-to-equity and $18.8B net debt, mitigated by government-backed receivables and investment-grade access.
0.11 beta and a monopsony government customer make this among the lowest-volatility names in industrials.
16.7x forward P/E and 17.8x EV/EBITDA are reasonable if EPS normalizes; 1.64x P/S offers no margin of safety on its own.
Aggressive buybacks (230.6M shares outstanding, shrinking) plus dividends drive per-share compounding despite flat revenue.
A ~$13.20 annualized dividend with a multi-decade growth track record anchors total return for income investors.
Competitive Snapshot
| Company | EBITDA Margin | 3Y Rev CAGR | FCF Margin | Leverage | Fwd P/E |
|---|---|---|---|---|---|
RTX RTX Corporation | ~16% | ~8% | ~7% | ~2.5x net debt/EBITDA | ~21x |
NOC Northrop Grumman | ~14% | ~5% | ~7% | ~1.5x | ~19x |
GD General Dynamics | ~12% | ~7% | ~6% | ~1x | ~19x |
BA The Boeing Company | ~5% | ~4% | negative | Highly levered | n/a (loss-making) |
LMT trades at a forward-P/E discount to RTX (~21x) and roughly in line with NOC and GD (~19x), despite carrying the group's premier franchise in the F-35 and hypersonics. Its charge-depressed margins understate structural profitability versus peers, making the discount a relative-value opportunity; Boeing remains a defensive contrast — a debt-laden turnaround, not a comparable execution engine.
Business & Strategy
Four segments — Aeronautics (F-35, air mobility), Missiles & Fire Control (tactical missiles, air/missile defense), Rotary & Mission Systems (helicopters, naval, radar), and Space (satellites, strategic systems). MFC and Space are the growth pull amid missile-replenishment and space-security demand, while Aeronautics remains the F-35 cash anchor.
The U.S. government dominates revenue, supplemented by international and foreign-military-sales customers contracted through the Pentagon.
Long-cycle production and development contracts (fixed-price and cost-plus) plus high-margin sustainment and services on installed platforms. Sustainment provides a recurring annuity that dampens program-development volatility.
Fixed-price development cost overruns (the source of 2025 charges), skilled-labor and supply-chain inflation, and R&D on hypersonics and autonomy.
Prohibitive barriers to entry — decades-long program lock-in, classified capabilities, and the sole-source F-35 franchise create a near-monopoly moat. Switching costs for the DoD are effectively infinite over a platform's multi-decade lifecycle.
Monetary-Policy Sensitivity
- Lower discount rate on long-duration government cash flows
- Modestly cheaper refinancing of $20.7B debt load
- Dividend-yield appeal vs falling risk-free rate
As a low-beta, dividend-paying bond proxy with government-backed revenue, LMT is a mild beneficiary of rate cuts through valuation and refinancing channels. But defense budgets — not the rate cycle — are the dominant fundamental driver, capping rate sensitivity.
SWOT Analysis
- Sole-source F-35 franchise and unmatched program backlog
- Ultra-low 0.11 beta and government monopsony revenue base
- Strong beat history (75% beat rate, +11% avg surprise)
- Aggressive buybacks compounding per-share value
- Fixed-price program charges gutting reported margins (Q2 2025 GM 4.1%)
- Flat revenue (+0.3%) and negative earnings growth (-11.5%)
- High 276% debt-to-equity and thin $1.89B cash
- Negative Q1 2026 EPS surprise breaking the beat streak
- NATO 5%-of-GDP spending trajectory and European production expansion
- Undersea-warfare push via $3.45B Ultra Maritime deal
- ATACMS co-production with Rheinmetall capturing EU demand
- Missile-replenishment supercycle from Ukraine/Middle East depletion
- Continued fixed-price development overruns
- U.S. budget-continuing-resolution and appropriations risk
- F-35 sustainment cost scrutiny and unit-price pressure
- Geopolitical de-escalation reducing the spending premium
Catalysts & Event Risks
- Q3 2026Q2 2026 earnings
Next print will test whether Q1's margin recovery is durable or if fresh program charges resurface.
- 2026-07-07NATO Ankara summit outcomes
F-35 sales (including potential Turkey deal) and European production commitments crystallize the spending tailwind.
- Q3 2026Ultra Maritime deal close
Integration of the $3.45B undersea-warfare acquisition adds a new growth vector and tests M&A discipline.
- Q4 2026FY2027 defense appropriations
Congressional budget outcome sets the multi-year demand baseline for missiles and space programs.
- Q3 2026ATACMS Europe MOU firming
Conversion of the Rheinmetall memorandum into a binding co-production center would validate EU market entry.
The catalyst calendar is unusually front-loaded and geopolitically driven — NATO commitments and missile replenishment are already in motion, while the Q2 print is the key fundamental proof-point on margin normalization.
Technical Analysis
LMT is range-bound in the mid-$500s, pinned between the 50-day ($520) and 200-day ($541) averages after retracing 22.6% off the $692 high. Current price at $535.38 sits at the 44th percentile of its 52w range — neither oversold nor extended. Key support near $510 aligns with the analyst target-low and 52w structure; a break above $547 (day high and resistance) would target a reclaim of the 200-day and open the path toward $615. Risk-reward favors accumulation near support given the low-beta downside cushion.
Verdict
Macro context. A synchronized global rearmament cycle — NATO spending hikes, Strait of Hormuz escalation, and renewed U.S.-Iran strikes — underpins a multi-year defense-demand backdrop that decouples LMT from broader industrial-cycle risk. Budget-appropriations timing and fixed-price contracting remain the idiosyncratic swing factors.
ACCUMULATE. LMT offers a rare combination of secular demand visibility (NATO rearmament, missile replenishment, undersea M&A) and a discounted 16.7x forward multiple that prices in EPS normalization off the 2025 program charges. The risks — high leverage, flat near-term revenue, and a broken beat streak — are real but well-telegraphed, and the 0.11 beta plus ~2.5% dividend provide downside protection. Accumulate into the mid-$500s range toward a $615 target (15% upside); this is a low-volatility compounder, not a momentum trade.
Data source: Yahoo Finance / yfinance · fetched 7/8/2026, 10:08:28 AM