Is Lockheed Martin Stock A Real Bargain?
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Lockheed Martin (LMT) stock trades at 20.4 times earnings, compared with 22.3 for the median S&P 500 company.This discount follows a 24.9% total return over the past year. Lockheed may represent a good business selling at a discount, or it could simply be fairly priced following a margin slump. For the stock to be a bargain, Lockheed must turn its record backlog of jet and missile orders into faster sales while keeping its margin up. Are those orders showing up in Lockheed’s sales yet?
Lockheed Martin’s Sales Are Growing Faster Than Before
Over the four fiscal quarters through September 2026, Lockheed’s sales rose 7.9%. This pace compares with 2.9% and 5.3% in the two twelve-month periods before it. In fiscal Q3 2026 alone, sales grew 11.3% from a year earlier, moving faster than the company’s own recent pace. Over the full twelve months, however, Lockheed’s 7.9% growth trails the 8.6% rate of the median S&P 500 company.
Large orders stand behind that growth. Lockheed ended fiscal Q3 2026 with a record backlog of $292 billion, up $113 billion from a year earlier. A seven-year contract for PAC-3 interceptors provided the largest addition. On the October 22 call, management also said an initial multi-year agreement with the Pentagon gives the F-35, built by the Aeronautics unit, a path to 850 U.S. aircraft over ten years.
The company also produces cash. Lockheed’s free cash flow over the past twelve months equals 6.3% of its market value.
Has Lockheed Martin’s Margin Fully Recovered?
The margin has not fully recovered relative to the company’s past, though it has come back a long way. Lockheed’s operating margin increased to 11.8% over the four quarters to September 2026, climbing from 8.3% in the four quarters a year earlier. The current figure sits above the 10.7% average from the last three twelve-month periods.
At only six of the 40 fiscal quarter ends since fiscal Q4 2016 has Lockheed’s operating margin been lower than its latest 11.8%. The margin previously peaked at 14.4% in fiscal Q3 2019. The median S&P 500 company earns an 18.9% operating margin, though other defense contractors run close to Lockheed, including a 10.4% margin at General Dynamics over its latest four quarters.
During the fiscal Q3 2026 call, management said unfavorable profit adjustments on the F-16 and C-130 programs partly offset higher Aeronautics sales. A thin margin that has swung this much offers one reason the market may be right to pay less for each dollar of Lockheed’s earnings.
How Is Lockheed Martin Raising Output?
Lockheed is investing more than $8 billion through 2030 to modernize more than 20 facilities while expanding its supply chain and workforce, management said. The missile unit is already showing early results. Missiles and Fire Control sales and profit both rose 24% in fiscal Q3 2026, and management said the company’s munitions ramps are ahead of schedule. Management also said the government has agreed to an annual price escalator in new missile agreements, though the fine points are still being negotiated. The company says this escalator allows Lockheed to keep the extra profit when it invests in its factories.
Management raised its fiscal 2026 sales guidance to a range of $80 billion to $82 billion, representing about 8% growth at the midpoint. Aeronautics is the exception. Management trimmed the unit’s 2026 outlook slightly on later timing for the next F-35 contract lots. The other three units all raised their 2026 profit outlooks. Looking ahead, Lockheed will also need cash for a pension contribution of more than $1 billion that management expects to be required in 2027.
What Would A Lockheed Martin Buyer Be Betting On?
With faster sales already reported, a buyer at today’s price is betting that Lockheed can hold its margin steady as missile and F-35 output climbs, rather than watch it slide back as it did in the twelve months to September 2025. Sales growth has held up so far. The margin has recovered, but it remains low for Lockheed. The operating margin Lockheed reports for fiscal Q4 2026, expected in January 2027, is the number to watch. Management will also give its first 2027 outlook that month. That outlook follows a 6.9% drop in the stock on November 4, after midterm results gave Democrats control of the Senate and House and a report said the record $1.5 trillion defense budget request could be cut to $1.1 trillion.
That bet also has to ride out days like November 5. Here’s what followed the last 21 like it.
Beyond LMT: A Systematic Way To Invest
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