# Lockheed Martin Corp. (LMT) — InvestMoat Analysis _Last analyzed: August 13, 2026_ _Asset class: equity · Canonical page: https://investmoat.com/stocks/lmt_ ## Scores | Dimension | Score (0–100) | | --- | --- | | Moat durability | 83 | | Growth trajectory | 72 | | Valuation | 81 | | **Composite** | **80** | | **Recommendation** | **Accumulate** | 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:** ~$140B ## 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. ## 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 $606.72, LMT trades about 17% above the rebuilt bear case ($520) and roughly 20% below the new base case ($760). Q2's record backlog, $2.9B FCF and raised guidance justify moving the ladder up, but the stock has already rallied from the Q1 miss. The setup remains attractive on defense demand and cash conversion, though it is no longer the near-bear bargain implied by the May file. **Fair value:** $760 — At roughly 20x the updated 2026 EPS guide and about 20x the new FCF guide, LMT prices a healthier backlog conversion story without demanding a heroic multiple. The $760 base case assumes sales land near the raised guide and backlog quality remains high; the $950 bull case requires sustained missile/interceptor demand and clean execution on classified programs. | Multiple | Value | Note | | --- | --- | --- | | Trailing P/E (GAAP) | ~24× | still affected by prior-year program losses rolling through the TTM base | | Forward P/E (NTM) | ~20× | spot price divided by updated FY2026 EPS guide midpoint of ~$30.30 | | PEG Ratio | ~2.5× | fwd P/E ÷ ~8% sales growth, before buyback and margin leverage | | Price / Sales (NTM) | ~1.7× | updated FY2026 sales guide $79.75-$81.75B | | Price / FCF | ~20× | FY2026 FCF guide raised to more than $7.0B | The valuation is now anchored by Q2 evidence rather than Q1 faith: record backlog, $65B in new orders and a raised FCF guide support a fair-value multiple around 20x earnings. The stock is not cheap enough to ignore budget or program-charge risk, but a $230B backlog and raised segment-profit outlook give the base case better visibility than it had in May. _(as of August 2026)_ ## Price scenarios ### Bear — $520 Defense budget austerity combines with a repeat of large classified program write-downs, compressing FCF and forcing a multiple de-rating from the current premium. - 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, compressing the multiple toward the high teens ### Base — $760 Backlog converts as guided, cash conversion holds, MFC demand stays elevated, and 2026 EPS reaches the $29.95-$30.65 guidance range. - 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 ### Bull — $950 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 — adding $15-20B in new long-cycle backlog. - 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 an open-source research and education framework. Nothing here is financial advice. Past performance does not guarantee future results.