As geopolitical tensions escalate worldwide and defense budgets surge to record levels, investors are closely examining Lockheed Martin Corporation (NYSE: LMT) as a potential investment opportunity.
With the stock currently trading around $492, the defense giant presents a complex investment case that demands careful consideration.
Strong Q3 2025 Performance Signals Momentum
Lockheed Martin delivered solid third-quarter 2025 results, reporting sales of $18.6 billion compared to $17.1 billion in the same period last year, representing a 9% year-over-year increase.
The company generated net earnings of $1.6 billion, or $6.95 per share, compared to $6.80 per share in Q3 2024.
The company’s earnings per share of $6.95 surpassed analyst expectations of $6.39, marking an 8.76% surprise. Revenue also slightly exceeded forecasts at $18.6 billion compared to the expected $18.53 billion.
Most impressively, cash from operations reached $3.7 billion in Q3 2025, compared to $2.4 billion in Q3 2024, while free cash flow climbed to $3.3 billion from $2.1 billion.
Record Backlog Provides Multi-Year Revenue Visibility
Perhaps the most compelling aspect of Lockheed Martin’s investment thesis is its unprecedented order backlog.
The company reported a record $179 billion order backlog—equivalent to more than two and a half years of sales. This massive pipeline provides substantial revenue visibility and underscores the strong demand for the company’s advanced defense systems.
The company secured significant wins across its marquee programs that drove the backlog to this record high, with multi-year contracts in missiles, aeronautics, and rotorcraft providing production visibility into the next decade.
Global Defense Spending Surge Creates Tailwinds
The macroeconomic environment for defense contractors has rarely been more favorable. In 2025, global defense spending continues to rise, driven by geopolitical tensions, military modernization, and regional security challenges.
The United States remains the top military spender, investing nearly $895 billion in 2025, accounting for over 35% of global defense spending.
Defense spending is rising across every region, with double-digit percentage jumps in Europe and the Middle East as conflicts in Ukraine and Gaza continue to reshape security priorities.
NATO members increased their defense spending significantly following Russia’s 2022 invasion of Ukraine, with total defense spending estimated to increase 22 percent in real terms between 2022 and 2025. All 31 NATO allies are expected to reach the 2% of GDP benchmark in 2025.
Upgraded 2025 Guidance Reflects Confidence
Based on strong year-to-date performance, the company tightened its sales guidance range to $74.25 billion to $74.75 billion, up $250 million at the midpoint and implying 5% organic growth year-over-year.
The company also raised expectations for segment operating profit and earnings per share.
The Board approved a 5% increase in the quarterly dividend, marking the 23rd consecutive year of dividend increases and demonstrating continued confidence in Lockheed Martin’s stable financial performance.
Analyst Consensus and Price Targets
Wall Street maintains a cautiously optimistic stance on the stock. According to 14 analysts, Lockheed Martin has a Hold consensus rating as of November 2, 2025. Wall Street analysts have set a price target of $518.79, reflecting approximately 5.5% upside from current levels.
The 14 analysts that cover Lockheed Martin stock have an average price target of $518.79, which forecasts a 5.47% increase in the stock price over the next year. The lowest target is $432 and the highest is $630.
Long-Term Price Forecasts Show Growth Potential
Looking further ahead, algorithmic models and analyst projections suggest significant appreciation potential:
- 2025 Outlook: Stock forecasts anticipate modest fluctuations with a generally positive trend. After an 8% rise last month, the stock is projected to reach approximately $466 in September, trading within a range of $449 to $484.
- 2030 Projections: Forecasts for 2030 project significant growth for Lockheed Martin, with prices expected to range between $645 and $923, reflecting a potential ROI of 99%.
Significant Challenges and Risk Factors
Despite the positive momentum, investors must weigh several substantial risks:
Operational Challenges and Program Losses
Lockheed Martin’s financial outlook has been negatively impacted by a series of program losses totaling approximately $1.6 billion, resulting in significant declines in segment operating income and earnings per share.
Analysts observe ongoing operational challenges within the Aeronautics, Missiles and Fire Control (MFC), and Rotary and Mission Systems (RMS) segments. Progress towards stabilizing performance on fixed-price development programs remains a watch item, with potential for further operational issues to impact near-term results.
Supply Chain Disruptions
Supplier disruptions have resulted in delays and increased costs and have adversely affected program performance and operating results. These dynamics are expected to continue in 2025.
Securities Fraud Allegations
A significant legal cloud hangs over the company. Lockheed Martin faces securities fraud allegations in the Khan lawsuit, with claims including misrepresenting profit booking rates and concealing losses in key programs.
The fallout has triggered cumulative stock price declines of over 25%, with shares shedding $49.84 in a single day on July 22, 2025.
Profitability Concerns
Profitability concerns represent the most substantial risk factor for potential investors. Margin pressures likely stem from the competitive nature of defense contracting, potential cost overruns on complex programs, and challenges of managing large-scale, multi-year projects with fixed-price components.
Competition and Execution Risk
Lockheed faces stiff competition from major rivals like Boeing, Northrop Grumman, and Raytheon.
Large-scale defense projects are prone to technical challenges, delays, and cost overruns. Any major setback on a flagship program like the F-35 could result in negative press, reduced profitability, and decline in investor confidence.
The Verdict: A Calculated Investment Decision
The decision to buy Lockheed Martin stock now or wait depends heavily on your investment profile and risk tolerance.
Reasons to Buy Now:
- Record backlog providing multi-year revenue visibility
- Strong cash flow generation with Q3 free cash flow of $3.3 billion
- Favorable macroeconomic environment with surging global defense budgets
- 23 consecutive years of dividend increases demonstrating shareholder commitment
- Attractive valuation relative to the broader S&P 500
- Potential 5-99% upside based on analyst targets through 2030
Reasons to Wait:
- Ongoing securities fraud litigation creating uncertainty
- Operational challenges and program losses totaling $1.6 billion
- Supply chain disruptions expected to continue
- Profitability pressures affecting margins
- “Hold” consensus rating from analysts suggesting limited near-term upside
- Stock down 16% over recent months, indicating investor skepticism
Investment Strategy Recommendations
For Conservative Investors: Consider waiting for greater clarity on the securities fraud litigation and evidence of operational improvement. The “Hold” consensus suggests patience may be rewarded.
For Value-Oriented Investors: The stock’s moderate pricing relative to its fundamentals and demonstrated resilience during market downturns suggest potential upside for risk-tolerant investors. Current valuation metrics appear attractive relative to the S&P 500.
For Growth-Focused Investors: The record backlog, rising defense budgets, and long-term growth projections present a compelling case, though near-term volatility should be expected.
For Income Investors: The 23-year dividend growth streak and recent 5% dividend increase make LMT attractive for those seeking reliable income with growth potential.
Bottom Line
Lockheed Martin stands at an inflection point. While the company benefits from unprecedented defense spending and a record backlog, operational challenges, legal uncertainties, and profitability pressures create near-term headwinds.
Recent analyst commentary reflects a balanced but increasingly constructive view on Lockheed Martin, with significant upgrades in price targets underscoring confidence in its growth prospects, though persistent operational risks and macro uncertainties continue to temper full-fledged enthusiasm.
The stock may be suitable for patient investors with a long-term horizon who can tolerate near-term volatility. For those seeking immediate gains or lower risk, waiting for operational improvement and legal clarity may be the prudent approach.
Current Price: ~$492 | Analyst Target: $518.79 (+5.5%) | 2030 Projection: $645-$923 (+31-88%)
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