# Lockheed Martin Corp. (LMT) — InvestMoat Analysis _Last analyzed: September 25, 2026_ _Asset class: equity · Canonical page: https://investmoat.com/stocks/lmt_ ## Scores | Dimension | Score (0–100) | | --- | --- | | Moat durability | 76 | | Growth trajectory | 72 | | Valuation | 79 | | **Composite** | **77** | Scores are computed deterministically from this asset’s data by the InvestMoat formula (see https://investmoat.com/llms.txt for methodology). Scores are not directly comparable across asset classes. ## Key stats - **Ticker:** LMT - **Market Cap:** ~$121B ## Moat Lockheed Martin is entrenched in US and allied military infrastructure through sole-source defense contracts, classified program lock-in, and decades of non-replicable defense platform data — the F-35 alone provides 27% of revenue and 30-40 years of sustainment runway. ### The Defense Platform Lock-In Lockheed Martin's moat is built on **Government Program Embeddedness and Regulatory Fortification**: - **Sole-Source Program Dominance:** Lockheed Martin is the prime contractor for the F-35 Joint Strike Fighter — the most expensive weapons program in history at ~$1.7 trillion lifecycle cost — and the only legal manufacturer of the airframe. The same applies to PAC-3 missiles, HIMARS rocket artillery, and the U-2/SR-71 successor programs at Skunk Works. Once designed into a military platform specification, LMT cannot be replaced without a multi-year, multi-billion-dollar re-engineering process. These are not contracts — they are infrastructure dependencies written into national defense postures. - **The Sustainment Flywheel:** F-35 sustainment now represents the fastest-growing portion of LMT's Aeronautics segment, shifting the revenue mix toward higher-margin, annuity-like income streams. With 1,000+ F-35s deployed across 20+ nations, LMT's ODIN sustainment platform captures all fleet health data, parts logistics, and mission system upgrades. The more aircraft deployed, the more indispensable — and profitable — the sustainment relationship becomes. This flywheel compounds for the 30-40 year service life of each airframe. - **Cleared Human Capital and Classified Program Lock-In:** Lockheed's Skunk Works division represents perhaps the most impenetrable non-physical moat in US industry: decades of classified program knowledge locked inside security clearances that cannot be legally disclosed, transferred, or replicated. Over 60,000 employees hold active security clearances, including TS/SCI — a recruiting and operational asset that new entrants (including AI-native defense startups) cannot replicate in years, let alone months. The classified nature of next-generation programs (space-based interceptors, next-gen air dominance) creates compounding lock-in as each new program builds on prior classified work. **Moat verdict:** Lockheed Martin is a net beneficiary of AI at the margins — AI strengthens its proprietary data moat (ODIN predictive maintenance, classified threat modeling) and its business logic lock-in (AI-assisted EW systems are harder to replicate than rule-based ones). The most AI-resilient moats are regulatory lock-in and transaction embedding, which are physically and legally impervious to AI disruption. The primary AI risk is at the margins: AI-native startups (Anduril, Shield AI) may capture niche autonomous systems contracts that could have gone to LMT, but they cannot compete for prime contractor roles on major platforms. Overall, LMT's core moat — government program embeddedness backed by regulatory barriers — is among the most AI-durable in any sector. ### Top competitors - **Northrop Grumman (NOC):** B-21 bomber, space and missile defense. - **RTX (RTX):** Missiles, sensors and Pratt & Whitney engines. - **Boeing (BA):** Won the F-47 sixth-generation fighter. ## Growth Q2 2026 reversed the soft Q1 narrative: sales rose 11% YoY to $20.1B, net earnings were $1.8B, EPS was $7.94, operating cash flow was $3.2B and free cash flow was $2.9B. New orders of $65B lifted backlog to a record $230B, helped by the multi-year THAAD interceptor award. Management raised FY2026 guidance to $79.75-$81.75B sales, $29.95-$30.65 EPS and more than $7.0B of free cash flow, framing 2026 as about 8% sales growth and 28% segment operating profit growth. - **Revenue CAGR estimate:** 7-9% - **Primary type:** both - **Margin trend:** expanding - **Key risk (moderate):** If FY2027 defense budgeting shifts into a continuing resolution or sequestration while classified program charges recur, the record backlog converts more slowly and the market questions whether Q2's cash-flow rebound is sustainable. - **Drivers:** - Missiles & Fire Control — Q2 backlog lifted by multi-year THAAD and missile demand; FY2026 sales outlook raised across segments (accelerating) - F-35 Sustainment / Aeronautics — Global F-35 fleet and sustainment demand continue to support raised 2026 sales guidance (stable) - Backlog / Cash Conversion — Record $230B backlog, $65B new orders, Q2 FCF $2.9B and FY2026 FCF guide >$7.0B (accelerating) - **Score derivation:** Base 70.0 (7-9% CAGR, midpoint 8%) + 2.7 trajectory (MFC/backlog and cash conversion accelerating) + 4 expanding margins - 5 moderate budget/program risk = 72 ## Valuation At ~$524 (September 24, 2026 close) LMT is back where it spent most of 2026, about 17× the $29.95-30.65 FY2026 EPS guide, despite Q2's record backlog and raised guidance. The August ladder put the base at $760, which is ~25× this year's EPS: above the ~20× its own valuation note called fair value and ~20% above the ~$620 Street median. The ladder is re-struck on ~20× FY2027 consensus EPS of ~$31.70, so the price sits ~18% below the $635 base and ~22% above a $430 bear. Still inexpensive for the cash conversion, but the market keeps charging for fixed-price program risk. **Fair value:** $635 — At ~20× FY2027 consensus EPS (~$31.70), the $635 base sits in line with the Street median target (~$620) and UBS's September upgrade to $674. The $760 bull requires the market to pay ~24× for sustained missile and interceptor demand and clean execution on classified and fixed-price programs. | Multiple | Value | Note | | --- | --- | --- | | Forward P/E (NTM) | ~17× | spot price ÷ FY2026 EPS guide midpoint of ~$30.30; ~16.5× FY2027 consensus of ~$31.70 | | PEG Ratio | ~2× | fwd P/E ÷ ~8% sales growth, before buyback and margin leverage | | Price / Sales (NTM) | ~1.5× | updated FY2026 sales guide $79.75-$81.75B | | Price / FCF | ~17× | FY2026 FCF guide raised to more than $7.0B | LMT has de-rated back to ~17× despite the Q2 beat and raise: investors are charging for fixed-price contracts and program charges rather than paying for the record backlog. A ~20× multiple on FY2027 consensus is a fair-value anchor consistent with the Street median; the old ~25× base was a bull-case multiple. _(as of September 2026 (price ~$524))_ ## Price scenarios ### Bear — $430 Defense budget austerity combines with further program write-downs on fixed-price and classified work, and the multiple compresses to ~14× the FY2026 EPS guide. - US defense budget faces a continuing resolution or sequestration in FY2027, delaying missile and air-platform procurement - A second large classified program write-down materializes in 2026-2027, triggering EPS revisions and eroding confidence in execution - Higher interest expense and pension assumptions offset the 2026 EPS rebound, and the multiple compresses to ~14× FY2026 EPS of ~$30.30 (≈$430) ### Base — $635 Backlog converts as guided, cash conversion holds, MFC demand stays elevated, FY2026 EPS lands in the $29.95-$30.65 range and FY2027 reaches the ~$31.70 consensus, valued at ~20×. - FY2026 sales land near the $79.75-$81.75B guide, with segment operating profit up roughly 28% YoY - Free cash flow exceeds $7.0B as Q2's cash conversion proves repeatable across the second half - Book-to-bill remains strong enough to keep backlog near record levels, extending revenue visibility into 2028-2029 - FY2027 EPS of ~$31.70 (Zacks consensus) × ~20× ≈ $635, in line with the ~$620 Street median target ### Bull — $760 MFC growth accelerates beyond guidance as NATO commits to 3% GDP defense spending, space-based interceptor contracts are awarded, and NGAD selection goes to LMT, and the market pays ~24× FY2027 EPS. - NATO and allied missile-defense orders accelerate PAC-3, HIMARS and THAAD demand beyond the raised 2026 plan - Lockheed wins major next-generation air or space-based interceptor work, adding another long-cycle backlog layer - FCF approaches $9-10B annually by FY2028 as mix shifts toward sustainment, missiles and services while the dividend compounds --- InvestMoat is a research and education framework. Nothing here is financial advice. Past performance does not guarantee future results.