Last Update 10 May 26

Fair value Decreased 2.29%

LMT: Space And Defense Program Execution Will Shape Future Risk Reward Balance

Analysts have nudged their average price target for Lockheed Martin lower by $14.93 to $637.60, reflecting updated assumptions around fair value, discount rates, revenue growth, profit margins and future P/E after a mix of recent target cuts and raises across the Street.

Analyst Commentary

Recent research on Lockheed Martin reflects a mix of optimism and caution, with several firms adjusting price targets both higher and lower and at least one new neutral initiation. Taken together, the commentary focuses on how the current share price lines up with execution on key programs, growth in adjacent opportunities and the risks around valuation assumptions.

Bullish Takeaways

Bullish analysts who raised price targets point to room for upside in fair value assumptions, suggesting that earlier models may not have fully reflected the company’s earnings power and potential for improved cash generation.
Several recent target increases highlight confidence in execution on core defense programs, with expectations that consistent delivery on contracts can support the current P/E framework that these analysts are using.
The higher target set by one large bank indicates interest in longer term growth drivers and a willingness to ascribe a richer valuation multiple if Lockheed Martin continues to perform against its backlog and program milestones.
Commentary around FireFly’s successful Alpha mission, where Lockheed Martin was the launch customer, underscores analyst interest in optionality from space related partnerships, which some view as incremental to the company’s long term growth story.

Bearish Takeaways

Bearish analysts who lowered price targets are baking in more conservative assumptions around revenue growth and margins, which pulls down their estimates of fair value even if core operations remain intact.
Several target cuts suggest concern that the prior valuation framework, including future P/E assumptions, may have been too generous relative to the company’s medium term growth outlook and execution risks on large, complex programs.
Some cautious views emphasize that, at previous target levels, the stock implied a premium multiple that could be harder to justify if contract timing, cost performance or budget cycles do not fully align with optimistic scenarios.
The new neutral initiation points to a more balanced stance, with upside seen as tied to steady execution, while downside is framed around the possibility that current valuation already discounts much of the expected growth and program wins.

What's in the News

Peru's planned purchase of 24 Lockheed F-16 fighter jets is now in limbo after earlier announcements around 12 new F-16 Block 70 aircraft to modernize the country's fleet, creating uncertainty around the scope and timing of this potential export program (Bloomberg, company announcement).
Nokia Federal Solutions and Lockheed Martin launched a modular, open-architecture 5G solution built for U.S. and allied defense forces, aiming to bring commercial-grade 5G into military vehicles and platforms through CMOSS compliant hardware and software (company announcement).
Lockheed Martin was selected by U.S. Space Force Space Systems Command to develop capabilities for the Space-Based Interceptor program, supporting an early engagement layer within a broader homeland missile defense concept that draws on the company's interceptor and missile tracking experience (company announcement).
The company, alongside the U.S. Space Force, brought the GPS constellation to its highest stated capability level with the launch of GPS III Space Vehicle 10, the final satellite in the GPS III series, which adds resiliency, accuracy features and an optical crosslink demo payload while setting up the follow-on GPS IIIF program (company announcement).
Lockheed Martin reaffirmed 2026 guidance, with expected sales of US$77.5b to US$80b and anticipated year over year sales growth of about 5% and operating profit growth of about 25%, and projected diluted EPS in a range of US$29.35 to US$30.25 (company guidance).

Valuation Changes

Fair Value: The average fair value estimate has fallen slightly from $652.53 to $637.60, a move of about $14.93.
Discount Rate: The discount rate has risen slightly from 7.78% to 8.18%, indicating a modestly higher required return in updated models.
Revenue Growth: Forecast revenue growth has increased from 4.89% to 5.35%, reflecting a small uplift in expected topline expansion.
Net Profit Margin: Expected net profit margin has moved up from 8.94% to 9.11%, suggesting a slightly stronger earnings profile on each $ of sales.
Future P/E: The future P/E assumption has edged down from 22.59x to 22.10x, indicating a modestly lower valuation multiple applied to projected earnings.

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Key Takeaways

Robust demand for advanced defense platforms and technologies, driven by geopolitical tensions and operational success, is fueling sustained revenue and backlog growth.
Enhanced risk management, ongoing efficiency initiatives, and strong investment in next-generation technologies are expected to support margin recovery and long-term earnings stability.
Cost overruns, reliance on legacy programs, budget uncertainty, regulatory risks, and intensifying competition threaten margins, cash flow, revenue growth, and long-term competitiveness.

Catalysts

About Lockheed Martin

An aerospace and defense company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide.What are the underlying business or industry changes driving this perspective?

Demand for advanced platforms such as the F-35, PAC-3, THAAD, and hypersonic weapons is being reinforced by actual combat use and rising geopolitical tensions, with multiple U.S. and international customers increasing orders and strong backlog growth likely, positioning Lockheed Martin for robust top-line (revenue) growth going forward.
Lockheed Martin's technological leadership in areas like stealth, electronic warfare, hypersonics, and integrated air/missile defense systems is being validated by operational success and customer priorities, supporting future contract wins and an expanding addressable market, which should lift revenues and provide opportunities for higher-margin, next-generation products.
The growing focus on homeland defense initiatives such as "Golden Dome," missile warning networks, and increased munitions spending suggests future secular increases in U.S. defense budgets and multi-year, high-value contract awards that are likely to contribute meaningfully to backlog, revenue visibility, and cash flow stability.
Recent program charges and process improvements have led to enhanced risk management, contract discipline, and cost controls, which-combined with ongoing digital transformation and operational efficiency drives-are expected to support future margin recovery and improved earnings growth in the medium term.
Lockheed Martin continues to invest heavily in R&D and next-generation technologies, enabling it to maintain technological leadership and diversify future revenue streams, further supported by public-private partnerships (e.g., rare earth magnet supply chain), all of which should underpin sustainable earnings and cash flow growth over the long term.

Lockheed Martin Earnings and Revenue Growth

Lockheed Martin Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Lockheed Martin's revenue will grow by 5.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 6.4% today to 9.1% in 3 years time.
Analysts expect earnings to reach $8.0 billion (and earnings per share of $35.3) by about May 2029, up from $4.8 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 22.2x on those 2029 earnings, down from 24.6x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 36.9x.
Analysts expect the number of shares outstanding to decline by 1.59% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.18%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

Significant financial charges ($1.8 billion in Q2 2025) across major legacy programs, especially on complex fixed-price contracts, reveal persistent cost overruns, design, integration, and test challenges-creating risk of further profit compression and potential future earnings downgrades.
Ongoing reliance on and challenges within large classified and legacy programs (e.g., Aeronautics Classified, Sikorsky's TUHP and CMHP) could constrain top-line growth if technical or contractual issues continue, while limited revenue diversification raises the risk of stagnating or contracting core revenues.
Exposure to changing U.S. and allied defense budgets-including recent signals of reduced F-35 procurement requests and increases in alternative priorities (e.g., B-21 program, nuclear modernization)-poses risk to future contract awards and may impact revenue growth if defense spending priorities shift.
Regulatory and legal headwinds, such as the $4.6 billion tax dispute with the IRS, introduce uncertainty and could result in significant cash outflows or increased tax liability, negatively impacting free cash flow and net income in the medium term.
Intensifying competition and shifting industry profit pools-toward commercial space, hypersonics, counter-UAS, and integrated platform-centric or software-based solutions-may erode Lockheed Martin's share of traditional military hardware contracts, threatening both margins and future earnings if innovation and adaptation lag competitors.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $637.6 for Lockheed Martin based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $756.0, and the most bearish reporting a price target of just $511.0.
In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $87.8 billion, earnings will come to $8.0 billion, and it would be trading on a PE ratio of 22.2x, assuming you use a discount rate of 8.2%.
Given the current share price of $512.41, the analyst price target of $637.6 is 19.6% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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