Lockheed Martin’s (LMT) fighter-jet and missile businesses are clicking on all cylinders, and the defense giant recently reported outstanding third-quarter results. With the Street getting excited about Lockheed stock and the company developing promising new products, the name looks poised to climb a great deal over the next year and in the longer term.
LMT’s Fighter-Jet and Missile Businesses Are Really Taking Off
On October 23, the Department of War agreed to purchase 850 of LMT’s F-35 Lightning II stealth fighter planes within the next ten years. As a result of the deal, Lockheed will receive “at least $78 billion” from Washington.
Speaking on LMT’s Q3 earnings call on October 22, CEO Jim Taiclet said that, including demand from foreign countries, the firm will produce 156 F-35s for sale annually over the next decade.
In the third quarter, Aeronautics segment revenue surged 13% versus the same period a year earlier to $8.2 billion.
Turning to Lockheed’s missile business, the company in July obtained a seven-year contract worth as much as $53.86 billion to supply its PAC-3 interceptors to the Department of War.
More recently, LMT reached a “framework” agreement with the Pentagon in Q3 “to accelerate production of (its) Joint Advanced Tactical Missile,” Taiclet reported. Also known as JATM, the air-to-air missile reportedly features an “ultra-long-range motor,” along with “advanced anti-countermeasure and electronic defeat features.” Further, JATM can travel five times faster than sound and has a range of “120+” miles. The dollar value of the framework deal was not disclosed.
But indicating that foreign countries could have significant demand for the JATM, Australia has agreed to spend about $520 million on the system.
Additionally, Lockheed signed a $1.2 billion contract to provide its Precision Strike Missile to the Pentagon.
Last quarter, revenue for LMT’s Missile and Fire Control unit soared an impressive 24% versus the same period a year earlier to $4.5 billion.
Outstanding Q3 Results and the Street’s Recent Embrace
Most impressively, LMT’s backlog jumped 27% from the end of Q2 to the end of Q3, reaching a record $292 billion. With this surging backlog, along with the extremely high book-to-bill ratio of 4 that LMT achieved in Q3, it is well positioned to rapidly increase its top and bottom lines over the next year.
In Q3, the firm’s earnings per share jumped 15% year over year to $7.97, and revenue increased 11% versus the same period a year earlier to $20.7 billion. Moreover, the company raised its 2026 sales guidance to $80 billion-$82 billion from $79.75 billion to $81.75 billion, and it hiked its full-year EPS outlook to $30.35-$30.75 from $29.95-$30.65.
In response, Morgan Stanley upgraded LMT to Overweight from Equal Weight and raised its price target to $835 from $690. According to the investment bank, the defense contractor’s stock does not reflect its long-term growth outlook. Citing the company’s ramping momentum, Citi raised its price target to $706 from $691 and maintained a Buy rating.
LMT stock has also gained momentum, rising 10% in the five days ending October 26 and 16.5% in the month ending the same day.
Lockheed’s Innovations and Its Low Valuation
Recent technological milestones include launching a missile from an unmanned ship, incorporating AI into its targeting system, and creating “an AI-enabled battle management prototype.” Additionally, LMT made continued progress on its “next-generation interceptor,” which is supposed to be launched in 2030.
Despite Lockheed’s strong growth and powerful, positive catalysts, shares are trading at a low forward P/E of 18.
*This article is intended to be informational only; it is not financial advice.
