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Bull: Accelerated global defense spending and margin expansion drive premium valuation.
Defense Budget Cuts: Significant reduction in U.S.
Lockheed Martin is a premier mature dividend payer with an entrenched wide-moat position in global defense, offering highly visible cash flows and steady capital returns.
Lockheed Martin is a premier mature dividend payer with an entrenched wide-moat position in global defense, offering highly visible cash flows and steady capital returns.
High switching costs for defense platforms
Intangible assets via classified clearances and patents
Elevated geopolitical tensions driving global defense modernization and procurement.
Buy based on highly visible cash flows, a robust dividend, and significant valuation upside.
Lockheed Martin Corporation, an aerospace and defense company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services in the United States, Europe, Asia, the Middle East, and internationally. The company operates through four segments: Aeronautics; Missiles and Fire Control (MFC); Rotary and Mission Systems (RMS); and Space. The Aeronautics segment offers combat and air mobility aircraft, unmanned air vehicles, and related technologies. The MFC segment provides air and missile defense systems; tactical missiles and precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support, and integration services; and ground vehicles. The RMS segment offers military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar and laser systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, simulation and training solutions, and services and supports surface ships. The Space segment provides satellites; space transportation systems; strategic, advanced strike, and defensive systems; and classified systems and services in support of national security systems. This segment also provides network-enabled situational awareness and integrates space and ground global systems to help its customers gather, analyze, and securely distribute critical intelligence data. It serves primarily serves the U.S. government and international customers, as well as foreign military sales contracted through the U.S. government. The company was formerly known as The Lockheed Corporation and changed its name to Lockheed Martin Corporation in March 1995. Lockheed Martin Corporation was founded in 1912 and is based in Bethesda, Maryland.
A sustained freeze or reduction in the U.S. defense budget combined with severe supply chain inflation, compressing operating margins below 9% and halting top-line growth.
High switching costs for defense platforms
Intangible assets via classified clearances and patents
Economies of scale in large government contracts
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $6.0B after capex $1.7B, with terminal value at 73.9% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
If margins expand >11.5% and F-35 deliveries accelerate, upgrade near-term estimates. If fixed-price contracts trigger charges, review downside.
If margins expand >11.5% and F-35 deliveries accelerate, upgrade near-term estimates. If fixed-price contracts trigger charges, review downside.
If margins expand >11.5% and F-35 deliveries accelerate, upgrade near-term estimates. If fixed-price contracts trigger charges, review downside.
If margins expand >11.5% and F-35 deliveries accelerate, upgrade near-term estimates. If fixed-price contracts trigger charges, review downside.
Stable capital returns through dividends and repurchases funded by visible cash flows.
Elevated geopolitical tensions driving global defense modernization and procurement.
Fiscal austerity and budget sequestration limiting defense spending growth.
Stable capital returns through dividends and repurchases funded by visible cash flows.
Trim positions if price approaches $780 or if margins structurally deteriorate below 10%.
Strong Buy
The 21% discount to internal valuation cross-checks and composite fair value offers a compelling entry point for a wide-moat mature dividend payer.
LMT is rated Buy at $506.51 versus the reconciled fair value midpoint of $644.43, implying +27.23% upside/downside.
At $506.51, the stock is measured against the final $644.43 midpoint and +27.23% upside/downside, so new capital should respect the report margin-of-safety discipline.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Budget constraints and supply chain issues compress margins and stunt top-line growth.
Significant reduction in U.S. DoD spending prioritizing legacy system phase-outs over new procurement.
Chronic inflation and supply chain bottlenecks drive severe losses on legacy fixed-price contracts.
Unexpected rapid resolution of major global conflicts reducing international demand for tactical systems.
The five developments that would weaken our investment case.
Contract cost overruns and persistent supply chain inefficiencies would compress program margins, reducing net earnings stability and undermining the predictability of defense program cash flows.
Current:10.3% for the period ended 2025-12-31
Alert ifPersistently drops below 9.0% over two consecutive quarters
Delivery halts and upgrade certification delays on flagship aeronautics programs would trigger contractual withholding penalties, deferring milestone revenue recognition and increasing inventory carrying costs.
Current:10.2% for the period ended 2025-12-31
Alert ifCompresses below 8.5% over two consecutive quarters
Deteriorating operating cash generation relative to accounting net income would reveal excessive working capital absorption, constraining free cash flow available for shareholder dividends and buybacks.
Current:1.706 as of the report's 2026-05-10 analysis date
Alert ifDeclines below 1.0x over any trailing twelve-month period
Slowing top-line expansion indicates diminishing order intake and defense procurement budgetary constraints, eroding the long-term revenue backlog essential for sustaining multi-year production cadence.
Current:5.6% for the period ended 2025-12-31
Alert ifDecelerates below 2.0% over any fiscal year
Leveraging the balance sheet to sustain capital returns during operational cash flow shortfalls degrades capital efficiency, elevating interest expenses and diminishing aggregate enterprise economic value.
Current:19.6% as of the report's 2026-05-10 analysis date
Alert ifDeclines below 14.0% over any trailing twelve-month period
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Discount the explicit dividend path and its Gordon-growth terminal value at cost of equity.
Solve for the growth rate that makes the model value equal the report-date share price.
Accelerated global defense spending and margin expansion drive premium valuation.
Steady low-single-digit growth and 11% margins support visible cash flows and capital returns.
Warning level: Persistently drops below 9.0% over two consecutive quarters. Contract cost overruns and persistent supply chain inefficiencies would compress program margins, reducing net earnings stability and undermining the predictability of defense program cash flows.
Warning level: Compresses below 8.5% over two consecutive quarters. Delivery halts and upgrade certification delays on flagship aeronautics programs would trigger contractual withholding penalties, deferring milestone revenue recognition and increasing inventory carrying costs.
Warning level: Declines below 1.0x over any trailing twelve-month period. Deteriorating operating cash generation relative to accounting net income would reveal excessive working capital absorption, constraining free cash flow available for shareholder dividends and buybacks.
Warning level: Decelerates below 2.0% over any fiscal year. Slowing top-line expansion indicates diminishing order intake and defense procurement budgetary constraints, eroding the long-term revenue backlog essential for sustaining multi-year production cadence.
Warning level: Declines below 14.0% over any trailing twelve-month period. Leveraging the balance sheet to sustain capital returns during operational cash flow shortfalls degrades capital efficiency, elevating interest expenses and diminishing aggregate enterprise economic value.
| $67.57B |
| $71.04B |
| $75.05B |
| +4.4% |
| Gross profit | $8.29B | $8.48B | $6.93B | $7.62B | -2.8% |
| Operating income | $7.30B | $9.01B | $7.26B | $7.04B | -1.2% |
| Net income | $5.73B | $6.92B | $5.34B | $5.02B | -4.3% |
| EPS (diluted) | $21.66 | $27.55 | $22.31 | $21.49 | -0.3% |
| EBITDA | $8.71B | $10.44B | $8.82B | $8.73B | +0.1% |
| R&D | — | — | — | — | — |
| SG&A | — | — | — | — | — |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 75,048,000,000 |
|---|---|
| Cost of revenue | 67,429,000,000 |
| Gross profit | 7,619,000,000 |
| Operating expenses | 0 |
| Operating income | 7,731,000,000 |
| Non-operating items and tax | -2,714,000,000 |
| Net income | 5,017,000,000 |
| Total assets | 59,840,000,000 |
|---|---|
| Cash | 4,121,000,000 |
| Current assets | 25,362,000,000 |
| Total liabilities | 53,119,000,000 |
| Current liabilities | 23,335,000,000 |
| Shareholders’ equity | 6,721,000,000 |
Point-in-time financial data used in the 2026-05-10 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-12-31 | 66B | 8.7B | 5.7B | 7.8B | 6.1B | 1.7B | 1.4B | 238M | 7.9B | 3B | 4B | — | — | — | — | 2.5B | 15.5B | 12.7% | — | 6.9% | — |
| 2023-12-31 | 67.6B | 10.4B | 6.9B | 7.9B | 6.2B | 1.7B | 1.4B | 265M | 6B | 3.1B | 1.9B | — | — | — | — | 1.4B | 17.5B | 12.6% | — | 6.5% | — |
| 2024-12-31 | 71B | 8.8B | 5.3B | 7B | 5.3B | 1.7B | 1.6B | 277M | 3.7B | 3.1B | 2.8B | — | — | — | — | 2.5B | 20.3B | 9.9% | — | 6.9% | — |
| 2025-12-31 | 75B | 8.7B | 5B | 8.6B | 6.9B | 1.6B | 1.7B | 304M | 3B | 3.1B | 1.3B | — | — | — | — | 4.1B | 21.7B | 10.3% | — | 5.9% | — |
LMT trades at 15.8x forward earnings against a peer median of 34.3x; EV/EBITDA of 17.0x against a peer median of 17.8x; 6 peers.
| Level | Action |
|---|---|
| Thesis break | Trim positions if price approaches $780 or if margins structurally deteriorate below 10%. |
| RTX Corporation |
| 23.3x |
| 2.6x |
| 17.8x |
| 11.6% |
| 13.2% |
| BA | The Boeing Company | 55.3x | 2.0x | -66.4x | 169.9% | 1.7% |
| HWM | Howmet Aerospace Inc. | 46.0x | 12.6x | 43.2x | 33.8% | 28.5% |
| GD | General Dynamics Corporation | 19.2x | 1.7x | 15.4x | 18.0% | 10.5% |
