Lockheed Martin: Missiles Make Valuation Attractive Again

Lockheed Martin is upgraded to Buy, driven by missile production expansion in PAC-3, THAAD, and PrSM as key growth catalysts. Q2 was strong: revenue rose 11% to $20.1 billion, free cash flow recovered to $2.9 billion, the backlog reached a record $230 billion, and management raised the annual forecast. The MFC segment stands out with 19% revenue and 24% profit growth; management targets mid-teens CAGR and significant capital investment through 2030. LMT trades at 19.1x 2026E EPS, with upside potential if execution improves in MFC growth, cash flow conversion, and Aeronautics segment performance.

In March 2023, I gave Lockheed Martin a Hold rating. It already had strong defense catalysts, a large backlog, but the valuation was not attractive enough. The share price was around $474 then and is now around $580.