Lockheed Martin delivered a strong third-quarter earnings report on Oct. 22, surpassing Wall Street expectations and raising full-year guidance for the second consecutive quarter. LMT stock has climbed more than 20 percent year to date, but the risk-reward remains favorable for long-term investors.
The aerospace and defense manufacturer reported third-quarter sales of $20.7 billion, an 11 percent increase from the prior year, with earnings per share of $7.97—nearly $0.50 above consensus. All four business segments posted growth, with Missiles and Fire Control up 14 percent year-over-year. That's the cash-generation engine investors should watch: missile defense and air defense systems face multiyear international demand cycles, and Lockheed is capturing share.
Management now projects 2026 sales to exceed $80 billion and free cash flow between $7.8 billion and $8 billion—an $800 million increase from the previous quarter's projection. That revised FCF target matters because it funds both the 24th consecutive dividend increase (now yielding around 2.5 percent) and potential buybacks. The stock trades at reasonable valuations in the teens on both forward and trailing price-to-earnings, leaving room for multiple expansion if geopolitical tensions sustain defense spending.
The real catalyst: Lockheed's backlog grew 27 percent this quarter to $292 billion. That figure represents roughly three years of revenue visibility at current run rates. The company secured multiyear contracts for PAC-3 interceptor systems and 850 F-35 fighter jets—both programs with long production tails and international co-development upside. Every F-35 sold locks in decades of sustainment revenue.
For equity investors, the thesis is straightforward: consistent operational execution, a fortress backlog, rising guidance, and a growing dividend. Buy Lockheed for the next 18 months of visible earnings accretion and the geopolitical tailwind beneath defense budgets.
