Shares of America’s largest defense contractor, Lockheed Martin Corp. (LMT), have surged 7% over the past month, outperforming the Zacks Aerospace-Defense industry’s growth of 1.6% and the broader Zacks Aerospace sector’s rise of 0.8%. The stock also beat the S&P 500’s return of 2.9% during the same period.
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On the contrary, LMT’s industry peers, The Boeing Company (BA) and Embraer S.A. (ERJ), have lost 7.1% and 0.9%, respectively, over the same period.
What Pushed LMT Stock Up?
A handful of favorable news announcements, implying solid demand and growth prospects for Lockheed’s products, must have bolstered investors’ confidence in this stock, which got duly reflected in the form of a decent price hike at the bourses.
Among the notable news, one significant was the Polish ministry’s mid-August agreement with the U.S. government to modernize Poland’s fleet of 48 F-16 aircraft to the advanced F-16V Viper configuration. Next to that week, LMT completed delivery of five new Black Hawk helicopters to the Philippine Air Force.
Soon after that, Lockheed won a $720 million contract for the production of Joint Air-to-Ground Missiles and HELLFIRE missiles from the U.S. Army. At the end of August, the U.S. Army down-selected LMT’s Spike Non-Line-of-Sight system capability for the Mobile-Long Range Precision Strike Missile (M-LRPSM) Directed Requirement competition, awarding the company the first phase of the contract to develop and test a precision-guided missile system prototype for the M-LRPSM Directed Requirement.
The company opened its order book for September, with a handful of defense contracts, which included a $900 million production contract for Javelin missiles as well as associated equipment and services, along with a $9.8 billion award for the production of 1,970 Patriot Advanced Capability – 3 Missile Segment Enhancement (PAC-3 MSE) interceptors and associated hardware.
Will Lockheed Continue With Its Rally?
Looking ahead, the contracts mentioned above should play the role of a major growth catalyst for LMT’s revenue growth in the coming quarters, thanks to revenues generated once these are completed. To this end, it is also imperative to mention that a steady order flow culminates in a solid backlog count for defense contractors like Lockheed.
Evidently, the company’s backlog totaled $166.5 billion as of June 29, 2025, with its management expecting to recognize approximately 38% of its backlog over the next 12 months and approximately 64% over the next 24 months. Such a solid backlog count bolsters LMT’s long-term revenue prospects and thus might enable the stock to continue its rally on the bourses.
Meanwhile, apart from its proven dominance in the U.S. defense industry, Lockheed enjoys a strong prominence in the international defense market, with its international business generating 27.1% of its total sales, as of June 2025. Notably, orders for tactical missiles, Black Hawk helicopters, and F-35 jets from multiple nations highlight the solid demand enjoyed by LMT outside America.
Additionally, defense programs like Aegis and Multi-Mission Surface Combatant ships attract interest from Japan, Saudi Arabia, and others. This sustained international demand enhances Lockheed’s revenue diversification and positions it for long-term global expansion.
This is further reflected in the Zacks Consensus Estimate for LMT’s long-term (three-to-five years) earnings growth rate of 10.3%.
Now, let’s take a sneak peek at its near-term estimates to check if those mirror a similar growth story.
Near-term Estimates for LMT Stock
The Zacks Consensus Estimate for 2025 and 2026 sales implies an improvement of 4.5% and 4.3%, respectively, year over year.
However, its 2025 earnings estimates suggest a decline of 23.2%. On the other hand, LMT’s 2026 earnings estimate calls for a rise.
The near-term bottom-line estimates for LMT have moved south over the past 60 days, implying analysts’ declining confidence in the stock’s earnings-generating prospects.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
LMT Trading at a Discount
In terms of valuation, LMT’s forward 12-month price-to-earnings (P/E) is 17.34X, a discount to its peer group’s average of 20.37X. This suggests that investors will be paying a lower price than the company's expected earnings growth compared to its peers.
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Its industry peer, Embraer, is, however, trading at a premium to both LMT and the peer group average. ERJ is currently trading at a forward 12-month earnings of 22.36X.
Risks to Consider Before Choosing LMT
Lockheed faced significant financial challenges on classified contracts, recognizing $555 million losses in 2024 and about $1.4 billion cumulative losses by June 29, 2025, in its Aeronautics segment. Additionally, its Missiles and Fire Control segment recorded $1.46 billion in losses due to a competitively bid contract with fixed-price options, with $1.3 billion accrued as liabilities. Future performance issues or cost growth could lead to further material losses affecting financial results.
Moreover, Lockheed holds a poor solvency position, with both its long-term and current debt values exceeding its cash balance. Further, LMT’s long-term debt-to-capital ratio is higher than the industry average (as one can see below). Such a high debt-to-capital ratio suggests that the company relies more heavily on debt financing compared to its industry, indicating a higher financial risk and a greater burden on cash flow due to interest payments.
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How to Play LMT Stock?
Lockheed’s near-term earnings plunge, coupled with elevated debt levels increasing financial risk, may deter new investors from investing in this stock despite its long-term growth potential.
However, those who own this Zacks #3 (Hold) company’s shares may continue to do so, given its discounted valuation, strong performance at bourses and long-term growth catalysts. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
