Lockheed Martin (LMT) reported very strong second-quarter results and raised its full-year guidance significantly. What’s more, the firm won multiple large contracts related to missile defense and missile production, and looks well-positioned to benefit greatly from America’s increased expenditures on missile defense.
Given all of these points, along with the attractive valuation of LMT stock, some investors should consider buying the shares.
Impressive Q2 Results and Guidance Increases
The defense giant’s revenue jumped 11% versus the same period a year earlier to $20.1 billion, while its free cash flow surged to $2.9 billion compared with a loss of $150 million in Q2 of 2025. Most impressively, its backlog soared to a record of $230 billion, versus $166.5 billion during the year-ago period.
On the guidance front, LMT now predicts that its sales will advance about 8% in 2026, versus its prior outlook for a gain of roughly 5%. Further, the company expects free cash flow of $7 billion to $7.2 billion, up from its previous outlook of $6.5 billion to $6.8 billion.
The firm’s stellar Q2 earnings and guidance hikes show that, as I previously wrote, its Q1 results, which caused a big drop in its stock, did not actually “reflect badly on its fundamentals.”
Major Contract Wins and a Likely Major Beneficiary of Big Spending Hikes on Missile Defense
Lockheed obtained a huge seven-year, $35 billion contract “to quadruple” its production of interceptors for the THAAD missile-defense system. LMT was also granted a $3 billion contract to provide precision rocket artillery known as GMLRS, and it will receive $1.1 billion to develop rocket launchers called HIMARS.
Also encouraging for the longer-term outlook of LMT stock, CEO James Taiclet, Jr. reported that the firm had been chosen by the Space Force “to develop space-based interceptor prototypes (for) Golden Dome,” the Trump administration’s huge missile-defense initiative.
Lockheed head continued, indicating that significant revenue might not start flowing from the latter win for some time, the CEO did note that “capability demonstrations” for the prototypes are not slated to take place until 2028. Finally, in a decision that will likely generate meaningful revenue for LMT much sooner than the latter project, the Navy has decided to utilize the PAC-3 missile defense system on its surface ships. Lockheed, which received a contract in April related to this initiative, develops interceptors for the PAC-3.
In other areas, Lockheed received a $2.3 billon radar deal and contract modifications worth $1.4 billion on its hypersonic-weapons project.
Meanwhile, the War Department is asking Congress to increase America’s overall outlays on missile defense by 25% in fiscal 2027 to $85.8 billion. Given LMT’s high exposure to missile defense, the company should get a big boost from the likely, upcoming, large increases in spending in this area.
Valuation and outlook on LMT Stock
Despite its huge growth, impressive contracts, and guidance hikes, the shares have a rather low forward price-earnings ratio of 19.3 times.
Additionally, LMT stock has a significant dividend yield of 2.4%, and analysts on average expect its earnings per share to jump 41% and 7.2% in 2026 and 2027, respectively. Consequently, the shares look dramatically undervalued, and value investors should consider buying LMT stock.
*This article is intended to be informational only; it is not financial advice.
