Lockheed Martin

Lockheed reports four segments. Aeronautics (about 40% of sales) builds the F-35, the F-16 and the C-130. Missiles and Fire Control makes the PAC-3 and THAAD interceptors, GMLRS and PrSM rockets and long-range strike missiles. Rotary and Mission Systems is Sikorsky helicopters, radars and ship combat systems. Space builds satellites, the Orion capsule and the Trident submarine-launched missile.

About three-quarters of sales go to the U.S. government, and most of the rest to allies buying through it. Contracts run for years and are priced to give a steady single-digit to low-teens margin, which makes Lockheed a slow-growing, cash-generating business that pays out most of what it earns.

Third-quarter sales rose 11% to $20.7 billion. Missiles and Fire Control grew 24% as PAC-3, THAAD, GMLRS and PrSM production ramped, and Aeronautics 13%. Backlog jumped 27% in the quarter to $292 billion, including $52.5 billion for the PAC-3 MSE interceptor under a seven-year agreement worth up to $58.6 billion.

Lockheed raised its 2026 guidance for the second quarter running: sales of $80–82 billion, earnings of $30.35–30.75 a share and free cash flow of $7.8–8.0 billion. Management expects all four segments to grow in 2027, with a “clear line of sight” to high single-digit growth. The shares closed up about 7% on the day.

Anduril, valued at about $90 billion in an October employee share sale, is the most visible of a group of venture-backed defense companies that build products with their own money and sell them, rather than waiting for the Pentagon to fund development. Its 2026 revenue of about $4.3 billion is roughly 5% of Lockheed’s, but it is roughly doubling every year, and it has already won where it matters most: in June 2026 the Air Force chose Anduril and General Atomics to build the first collaborative combat aircraft (drone wingmen for fighters). Lockheed, Boeing and Northrop were not picked for that hardware, though all three are in the six-company pool competing to write the autonomy software.

The threat is real but narrow so far. Anduril’s wins come mostly in new categories the Pentagon is now funding (the 2027 request includes nearly $75 billion for unmanned and counter-drone systems), not in the programs that make up most of Lockheed’s backlog. The bigger long-term risk is budget mix: if more money goes to large numbers of cheap autonomous systems and less to high-end platforms, the primes’ share of new spending shrinks even as their old programs keep running.

Sales have grown about 3% a year since 2021, while operating income fell in 2024 and only partly recovered in 2025 because of losses on classified Aeronautics and Missiles programs and charges on fixed-price contracts. 2026 is the first year of a clear recovery: guidance implies about 8% sales growth and an operating margin back near 12%. The quarterly view shows each quarter.

At the end of September Lockheed had $6.0 billion of cash and $20.5 billion of long-term debt, about $14.5 billion of net debt. It bought back no shares in the first nine months of 2026 (against $2.25 billion a year earlier) while it funds the munitions expansion and the pending purchase of Ultra Maritime, but it raised its dividend for the 24th year in a row. It expects to contribute more than $1 billion to its pension plan next year.

One item to watch: Lockheed’s costs on the F-35 Lot 20 contract have run ahead of the funding authorized so far, and the company warns that results will suffer if negotiations on Lots 20 and later do not close. Lot 20 is now expected in 2027.

Weighted 25/50/25: $667. The bear case is a budget squeeze after the midterms plus share lost to cheaper autonomous systems; the bull case is the munitions ramp and F-35 multi-year deal running ahead of plan.

The price asks for less growth than management is guiding to, which is why the model sits above it. Before the results the shares were down 21% from their high as investors began to price in a Democratic Congress after the November 3 midterms, which could trim the proposed defense increase.

Upside: missile defense demand that management calls “permanent”, a 10-year F-35 production path, Golden Dome missile-defense spending, and a return to buybacks once the munitions build-out is funded.

Lockheed is the sole supplier of the interceptors and munitions now in most demand, under seven-year contracts. Anduril is taking the new drone and low-cost categories, which caps Lockheed’s share of future budgets, but it does not touch the F-35, PAC-3, THAAD or Trident this decade.

What would change the value: The budget after the November 3 midterms, F-35 Lot 20 funding and the 2027 guidance in January are the next inputs.