The main metrics used to evaluate Lockheed Martin would be how dominant the company is in their respective industry. Does it have predictable recurring revenue and healthy cash flow? This approach focuses on investing in companies with recurring revenue models and pricing power.
Lockheed Martin Corporation is an aerospace and defense company. They focus on researching and designing advanced technology systems, and also manufacturing these systems that serve worldwide.
The company mainly operates through four main segments: Aeronautics with combat jet aircraft, missiles and tactical weapons, rotary and advanced systems such as helicopters and missile defense, and space with satellites and intelligence systems. The company primarily serves the U.S. government and sells to allied countries through the U.S. government.
Lockheed Martin is a global leader in missile defense systems and dominates in this industry. It’s even more crucial with the escalating global threat of missile attacks. The demand for these sophisticated missile defense systems will be a key trend for countries worldwide.
Lockheed Martin has a wide variety of portfolio of highly capable and efficient missile defense systems.
This includes Aegis, Patriot Advanced Capability-3 (PAC-3), and Terminal High Altitude Area Defense (THAAD). It’s backed by long-term U.S. Department of Defence contracts. Thus, having a predictable source of revenue. Additionally, the “Big Beautiful Bill” significantly increases the defence spending of around $350 billion. The continuing trend of increasing defense budgets is expected to drive significant contracts and revenue for these systems in the coming years.
Lockheed Martin is a key contractor for the F-35 Program and other.
They’re biggest defense contractors in the U.S. with programs to produce the F-35 Lightning II fighter jet, THAAD missile defence system, and Black Hawk helicopters.
The F-35 Lighting II is a multirole 5th-generation fighter jet developed by Lockheed Martin and is still a significant program for the company.
The F-35 program is projected to continue driving a substantial portion of the revenue as production continues and international demand increases. The ongoing development to integrate new upgrades for the F-35 will also be a key value driver.
WHAT HAS CHANGED IN Q1?
Lockheed Martin’s Revenue had reached $18 billion in Q1. This was a 4% year-over-year increase in its revenue.
Firstly, the Missiles and Fire Control division experienced the biggest revenue growth. This segment had a 13% increase in sales. And it’s primarily driven by the increased production of missile programs such as the Long Range Anti-Ship Missile (LRASM) and Joint Air-to-Surface Standoff Missile (JASSM).
Secondly, the Aeronautics sales increased and increasing by 3%. This is primarily due to the demand for the F-35 production contract.
Lastly, the Rotary & Mission Systems (RMS) segment saw a 6% sales increase. This was a result of high demand for the Canadian Surface Combatant (CSC) and radar programs.
However, the space segment experienced a 2% decline in revenue due to the lower demand for the Next-Generation Overhead Persistent Infrared program. In conclusion, the 2025 outlook for Lockheed Martin anticipates $74.25 billion in sales and earnings per share of $27.15 guidance. Additionally, the Trailing P/E at 24.73 is currently higher than the Forward P/E, which is at 18.48. This means that analysts expect the earnings to increase going forward.
KEY TRENDS
Reliance on the U.S. Government
Lockheed Martin relies on the U.S. Government, as a large portion of its revenue is from the U.S government agencies. Such as, Department of Defense, Homeland Security, and NASA., The reliance on U.S. government spending remains the key factor for the company; however, the exact percentage may fluctuate annually. Therefore, the changes in government budget and policies or potential spending cuts and impact Lockheed Martin’s contract volume.
However, with the current geopolitical tensions, for example, between Israel and Iran. The U.S. government will certainly focus on national security and a lower probability of spending cuts. This is evident from the“Big Beautiful Bill,” which significantly increases the defence spending of around $350 billion.
Cybersecurity
There is an increase in frequency of cyberattacks as the world becomes more digitalized, and it poses a significant strain on IT security for the U.S. government. This includes cyberattacks from foreign countries and terrorist organization trying to impose malware on U.S. government devices.
This evident increase in cyberattack trends is expected to increase, and the demand for cybersecurity solutions to protect critical IT infrastructure and sensitive data will be crucial as of now and in the future. As a result, Lockheed Martin will benefit significantly from these trends as a prominent provider of cybersecurity services.
TREFIS PRICE
Aeronautics
The EBITDA margin for the Aeronautics division is around 10.6% in 2024. In contrast to 11.2% in 2019. This change reflects on the cycle of the various programs, such as the production of F-35. Shortly, the margin might rise slightly 11-12% due to the expected demand for F-35 production, according to Trefis.
However, if margins were to fall to under 8% due to tighter price negotiations from the Pentagon, there could be a downside of over 10% to Trefis price estimate for Lockheed Martin’s stock.
U.S. Mission Systems and Training
The segment revenues have grown from $10.8 billion in 2019 to $11.5 billion in 2024, driven by increased orders and a pre-existing backlog. It has since seen a gradual rise, and we forecast it to be north of $13 billion by the end of our review period. This segment revenue has grown $10.8 billion in 2019 to $11.5 billion in 2024. It’s caused by the increase in demand for such systems. It has since seen a rising trend and a forecast to be at $13 billion, according to Trefis.
However, if revenues rise at a higher pace to about $20 billion over the Trefis forecast period, there could be an upside of about 10% to Trefis price estimate for Lockheed Martin’s stock.
So, is Lockheed Martin a buy?
Do your due diligence and understand your risk tolerance. This is the most important step before investing your hard-earned money.
In this case, the metrics utilized to evaluate Lockheed Martin by their strong business models with recurring revenue sources. They also hold monopolies in their field for long-term growth. With predictable cash flow and consistent performance.
Lockheed Martin fits in this category as it’s one of the biggest defence contractors in the U.S. with programs to produce the F-35 fighter jet, and it’s backed by long-term U.S. Department of Defence contracts. Additionally, the “Big Beautiful Bill” significantly increases the defense spending of around $350 billion.
The company also expands by acquiring smaller firms. This gives them pricing power and opportunities to grow. With the current trend, Lockheed Martin is the type of business built for long-term investors looking to diversify into the aerospace and defence industry.
