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The Thesis
Lockheed Martin at $533 is trading 23% below its 52-week high with a record $230 billion backlog, a dividend it just raised for the 24th straight year, and third-quarter earnings seven days away.
TD Cowen calls the recent defense selloff “disorderly” — and disorderly selloffs in wide-moat franchises are usually where the entry edge lives.
Business Snapshot
Lockheed Martin is the world’s largest defense contractor. It builds the F-35 fighter jet, THAAD and PAC-3 missile defenses, the C-130J Super Hercules, Sikorsky helicopters, and military space systems.
The moat is structural: sole-source positions on decades-long programs, a $230.4 billion backlog, and a customer — the U.S. government and its allies — that cannot simply switch suppliers.
Financials: What the Numbers Say
The second quarter showed acceleration, not deterioration:
- Revenue: $20.06 billion, up 10.5% year over year
- Diluted EPS: $7.94 vs. $7.20 consensus — a clean beat
- New orders: $65 billion in the quarter, including a $35 billion multi-year THAAD award
- Backlog: $230.4 billion, a company record
- Free cash flow: $2.92 billion, versus negative $150 million a year earlier
- Full-year 2026 guidance raised: sales $79.75–81.75 billion, diluted EPS $29.95–30.65
The dividend tells the same story. On October 9 the board raised the quarterly payout 4.3% to $3.60 per share ($14.40 annualized) — the 24th consecutive annual increase. The yield is about 2.7%, above the industrials average of 2.3%, on a payout ratio under 50%.
Chart & Technicals
The stock has bounced 6.7% in five days off early-October support near $504, closing Thursday at $532.64 (+2.0%). Momentum is turning: RSI sits at a neutral 47.7 while the MACD line has crossed above its signal line.
Key levels:
Level Price Role Support $504–508 October swing low Resistance 1 $544.67 50-day moving average Resistance 2 $564.09 200-day moving average 52-week range $437.25–$692.00 ~23% below the high The honest read: the stock remains below both moving averages, so the downtrend isn’t technically reversed yet. But with a beta of just 0.13, this is a low-volatility name coiling under resistance into a known catalyst.
Valuation
At $533, Lockheed trades at 18.5x trailing earnings and about 16.5x forward earnings — below the sector average. For a company guiding 7% EPS growth with a $230 billion backlog, that multiple is undemanding.
Institutions own 74.2% of the shares, and Wall Street’s math agrees with the buy case. The consensus target is $628.83 (+18%), with UBS at $674 (Buy, upgraded September 8) and Rothschild Redburn initiating at $650 (Buy, October 6) on missile-demand expectations. Vertical Research upgraded after the selloff, projecting roughly 11% annual missile-division growth through the end of the decade.
Catalysts & What to Watch
- Q3 earnings — October 22, before the open (call 8:30 AM ET). Consensus: roughly $7.43–7.48 EPS on $20.44 billion revenue. The first full-quarter test of the raised 2026 outlook.
- Avio solid-rocket-motor deal (October 13): expanded U.S. production for ER GMLRS and Precision Strike Missile programs, backed by $500M+ in new capacity investment.
- PAC-3 Edge interceptor launch — a play on hypersonic missile-defense demand, if selected for Army programs.
- Midterm elections (November 3): defense budget clarity after the vote removes the “difficult setup” overhang Bernstein flags.
Risks
- Budget uncertainty. Continuing resolutions can delay contract timing and awards — the perennial defense-stock headache.
- Pre-election de-rating. Bernstein cut its target this week, arguing little helps defense names before the vote. If that view dominates, $504 support gets retested.
- New competition. Anduril’s lower-cost Steelfin interceptor is challenging Lockheed’s Patriot/THAAD franchise — worth watching, though unproven at scale.
- Execution. Fixed-price development programs carry cost-overrun risk; one bad charge can erase a quarter’s goodwill.
Bottom Line
You’re buying the world’s premier defense franchise at 16.5x forward earnings, 23% off its high, with a record backlog, a 24-year dividend-raising streak, and earnings in seven days. The budget noise is real, but it’s cyclical — the $230 billion backlog is not.
If Q3 confirms the raised outlook the way Q2 did, the gap to Wall Street’s $629 consensus target starts closing fast.
Related reading: Why RTX (RTX) Looks Like a Buy at $187 Ahead of Q3 Earnings · Caterpillar (CAT): Buying the 25% Pullback Before Q3 Earnings
What’s your take — is the market over-discounting defense budget noise here, or does the stock deserve to stay cheap until after the election?
Sources:
Finnhub LMT quote data
Barchart, “This Defense Stock Just Raised Its Dividend by 4.3%”
Morningstar/Dow Jones, “Lockheed Martin Lifts Quarterly Dividend by 4.3%”
PandaForecast LMT technicals (50/200-day moving averages)
AltIndex LMT technical analysis (RSI, MACD, support/resistance)
Ad-Hoc-News, “Lockheed Martin stock falls 1.21 percent before October 22 results”
Stocktwits/The Fly, Bernstein target cut and Q3 expectations
TradingView/Stocktwits, TD Cowen “disorderly” de-rating note
TheStockObserver, institutional ownership, free cash flow, Anduril competitionAuto-posted by the Bull Lounge research desk.
Not financial advice. Do your own research.
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