Got $10,000? Lockheed Martin Could Be A Defense Powerhous…
By Rich Smith – Apr 25, 2026 at 7:51PM EST
Key Points
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Lockheed Martin disappointed investors with flat sales and falling profits in its Thursday report.
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But the defense prime contractor is investing in production expansion that could grow missile sales three to four times.
President Trump on defense
President Donald Trump spent much of his first term complaining about Lockheed Martin’s high prices and talking down its marquee product, the F-35 Lightning II stealth fighter jet, which he called “not very good.” In his second term, the president first seemed ready to take up where he left off, vowing in February 2025 to “cut our military budget in half” — but that didn’t last long.
By early 2026, Trump had changed his mind. Instead of cutting spending, he demanded Congress pass a $1.5 trillion defense budget. At the same time, though, the president complained about the very companies he’s planning to shower with Pentagon riches — defense companies Lockheed — demanding they increase production, cancel dividends and buybacks, cut executive salaries, and sacrifice profit margins in the nation’s interest.
At the time, I warned this could have an impact on Lockheed Martin’s profit margins, and that’s exactly what we’re seeing in this week’s report.
Expand
NYSE: LMT
Lockheed Martin
Today’s Change
(-3.15%) $-16.70
Current Price
$513.09
Key Data Points
Market Cap
$118B
Day’s Range
$503.64 – $527.80
52wk Range
$410.11 – $692.00
Volume
141K
Avg Vol
1.7M
Gross Margin
10.70%
Dividend Yield
2.63%
Lockheed Martin’s first-quarter earnings
It takes time for a company to increase production capacity. Time, and also capital investment, which must be sunk into the business before sales can ramp up to drive revenue and earn profit. With Lockheed just starting the ramp-up phase, its sales were nearly flat in Q1 2026 — $18 billion, the same as last year’s Q1.
Capital expenditures, meanwhile, grew more than 12% to $511 million, pushing Lockheed into negative free cash flow for the quarter, and its operating profit margin declined 160 basis points to 11.7%. Net profit margin declined 110 basis points to 8.3%. Between flat sales and depressed profit margins, Lockheed’s per-profit fell 12.5% year over year.
What’s next for Lockheed Martin stock?
So, not a great quarterly report; you can see why investors might have been upset with Lockheed. And yet, consider what could come next for this defense prime contractor.
Over the course of Q1, Lockheed “pioneered a number of commercially inspired, long-term business arrangements with U.S. government leadership,” said CEO Jim Taiclet. Taiclet said the company “signed several framework agreements to accelerate and scale munitions production, including advanced Patriot Missile, THAAD, and PrSM [Precision Strike Missiles].”I the words “accelerate” and “scale” for investors, as they seem to promise both more revenue from missile sales and improved profit margins on those sales. Annual production rates for at least some of Lockheed’s missiles are expected to grow three- or even fourfold.
What’s more, because the supply agreements Lockheed signed with the Pentagon are all “multiyear,” these improvements in sales and profit margins could drive Lockheed profits higher for years, not quarters, and far beyond Trump’s second term.
The improvements may look small at first; Lockheed predicts it will grow sales only 3% to 6% in this first year of the ramp-up. But the improvements in profitability could compound quickly. Lockheed is forecasting full-year 2026 earnings between $29.35 and $30.25 per — at the midpoint, that’s as much as 37% growth versus 2025 profits. Meanwhile, thanks to this week’s sell-off, Lockheed stock is trading below 26 times earnings — and less than 18 times trailing free cash flow as I write this.
Sounds a bargain to me. If you’ve got $10,000 to invest that you don’t need for anything in the short or medium term, Lockheed Martin is worth a look.
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About the Author
Rich Smith is a contributing Motley Fool defense and stock market analyst covering publicly traded and emerging companies in defense, space, aerospace, and other sectors. Prior to The Motley Fool, Rich practiced international corporate law for Clifford Chance in Russia, and for the Russian-Ukrainian Legal Group in Moscow, Kyiv, and Washington, D.C. He holds a bachelor’s degree in international relations from the College of William & Mary, a law degree from the University of Baltimore, and a language certification from the International Institute of Russian Language & Culture in Tver, Russian Federation. The Globe and Mail once featured him as “one of the best stock pickers since 2009.”
Stocks Mentioned
Lockheed Martin
NYSE: LMT
$513.09
(-3.15%)-$16.70
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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