Lockheed Martin's LMT shares have risen 12.6% year to date, outperforming the Zacks Aerospace-Defense industry's decline of 4.1%. LMT is benefiting from a favorable macro backdrop of higher U.S. and allied defense spending, inventory replenishment and growing demand for missile defense, munitions, advanced aircraft and space systems.
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Shares of other defense stocks, such as General DynamicsGD and Northrop GrummanNOC, have shown mixed performance in the year-to-date period. Shares of General Dynamics have risen 9.7% while those of Northrop Grumman have lost 6.5% over the time frame.
Considering Lockheed Martin's outperformance, investors might be left wondering if this is a good time to add LMT stock to their portfolio. Let's examine the factors that contributed to the share price gain and assess the stock's investment prospects to make an informed decision.
Tailwinds for LMT Stock
Lockheed Martin is capitalizing on strong demand by securing longer-duration awards, enhancing revenue visibility and supporting capacity expansion. Backlog reached a record $230 billion as of June 28, 2026, after the company booked $65 billion of second-quarter orders and achieved a 3.2 book-to-bill ratio.
In August 2026, Lockheed Martin and Tata Advanced Systems signed an MOU designating Tata Advanced Systems as the prime Indian partner for locally co-producing the Javelin anti-tank missile. Javelin is developed and produced by the Javelin Joint Venture ("JJV"), a partnership between Raytheon in Tucson, Arizona, and Lockheed Martin in Orlando, FL. The collaboration strengthens LMT's exposure to India's rising defense spending, expands its international production footprint and could support higher Javelin volumes over time. With more than 55,000 missiles already produced, the Javelin program provides the partnership with an established product rather than an unproven system.
In August 2026, Lockheed Martin has been selected by the U.S. Missile Defense Agency to modernize its Modeling & Simulation Objective Simulation Framework, a virtual environment used to test and evaluate missile-defense systems before they are deployed. This is particularly attractive as missile threats become more complex and the Pentagon increases investment in layered missile defense. Lockheed Martin's broader missile-defense portfolio — including THAAD, PAC-3 and the Next Generation Interceptor — allows expertise gained through the simulation framework to complement its physical weapons programs.
On Aug. 11, 2026, Lockheed Martin announced a multimillion-dollar internal investment to develop a Modular Payload Delivery System ("MPDS") that uses proven hypersonic missile-body technologies but redesigns them into a modular architecture. A modular design should enable the company to respond more quickly to evolving Pentagon requirements while potentially reducing the time and engineering costs required to develop new variants.
Challenges for LMT Stock
Lockheed Martin remains exposed to cost-estimate and schedule risk on complex programs, especially under fixed-price arrangements. Second-quarter 2026 results benefited from the absence of the $1.6 billion in reach-forward losses recorded in the prior-year period, rather than from the elimination of the underlying execution risk. Aeronautics also recorded $160 million of lower net favorable profit adjustments.
Management cited F-16 and C-130 program challenges as factors affecting Aeronautics margins, while lower initial booking rates on new contracts may weigh on profitability. The company also retains existing classified and helicopter program exposures on its balance sheet, which could continue to generate additional program losses over time if cost, scope or approval assumptions deteriorate.
Estimates for LMT Stock
The Zacks Consensus Estimate for 2026 earnings per share (EPS) indicates year-over-year growth of 31.44%. LMT's long-term (three to five years) earnings growth rate is 19.19%.
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The Zacks Consensus Estimate for General Dynamics' 2026 EPS indicates year-over-year growth of 9.44%. GD's long-term earnings growth rate is 10.2%. The Zacks Consensus Estimate for Northrop Grumman's 2026 EPS indicates year-over-year growth of 9.45%. NOC's long-term earnings growth rate is 5.33%.
LMT's Earnings Surprise History
The company beat on earnings in three of the trailing four quarters and missed in one, delivering an average surprise of 8.85%.
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LMT's Debt Position
Currently, the company's total debt to capital is 70.08%, higher than the industry's average of 46.7%.
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LMT Stock Trades at a Discount
In terms of valuation, LMT's forward 12-month price-to-sales (P/S) is 1.51X, a discount to the industry's average of 2.4X. This suggests that the stock is trading at a lower valuation relative to its projected sales growth than its peer group.
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What Should an Investor Do Now?
Lockheed Martin is benefiting from strong defense demand, building a larger backlog and securing longer-term opportunities that improve revenue visibility and support future capacity expansion. Its partnerships and investments in Javelin production, missile-defense simulation, and modular hypersonic systems strengthen its international presence, broaden its technology portfolio and position the company to benefit from growing demand for advanced defense
capabilities.
Considering its financial pressures and current debt levels, new investors should wait and watch for a better entry point. Investors who already own this Zacks Rank #3 (Hold) stock may consider retaining it, given the company's earnings growth outlook and price performance.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
