Lockheed Martin has had a quiet but successful run. Among the leading American aerospace and defense companies, the stock outperformed RTX, General Dynamics, Northrop Grumman, and L3Harris with a 25.1% return over the previous year. However, Lockheed trades at a lower earnings multiple than the majority of those same peers when you consider how the market is pricing it. Analysts and investors are currently reexamining LMT due to this tension—strong performance, relatively modest valuation.
The stock is currently trading between $567 and $570 per share, down from a 52-week high of $692 reached in March 2026. There has been a real pullback, with some of it occurring rapidly. Following the midterm election results that gave Democrats control of both the Senate and the House, the stock fell nearly 7% in a single session on November 4, prompting immediate worries about the size of future defense budgets. That response makes sense because the defense sector is closely linked to federal spending decisions, but considering Lockheed’s current order book’s structural makeup, it might also be a little hasty.
That order book is exceptional. The company had a record backlog of $292 billion at the end of the third quarter of 2026, up $113 billion from just a year earlier. The largest contribution in the third quarter came from a single seven-year PAC-3 interceptor contract, which had a total value of up to $58.6 billion. A $35 billion, seven-year THAAD agreement was also signed earlier this year. These pipeline items are not speculative. Lockheed has a level of revenue visibility that most industrial companies would be jealous of thanks to these signed, long-term commitments.
The momentum was strengthened by the third-quarter results, which were released on October 22. Revenue increased by 11.3% year over year to almost $21 billion. Each business sector expanded. Missiles and Fire Control stood out, reporting a 24% increase, which was fueled by precisely the kinds of initiatives those large contracts are supporting. The management increased the sales forecast for the entire year 2026 to a midpoint of $81 billion, suggesting a growth of about 8%. They anticipate that all four segments will contribute to high single-digit growth in 2027.
It is important to comprehend the $8 billion production investment in more detail. Over the next three years, Lockheed plans to expand its manufacturing space by more than two million square feet across eight facilities. This build-out includes a major munitions center located in Troy, Alabama. With the addition of an automated production cell, the Grand Prairie, Texas location is growing to more than 735,000 square feet.
In 2026 alone, the Missiles and Fire Control network will hire and train over 3,000 workers. A large portion of the future is already being built, so this is not a promise. Production acceleration is proceeding ahead of schedule, according to CEO Jim Taiclet during the third-quarter earnings call.
The geopolitical context that underpins all of this is difficult to ignore. Air defense capabilities are being rebuilt by allied nations. F-35s, HIMARS systems, PAC-3 batteries, and THAAD are being ordered by nations throughout Europe and the Indo-Pacific. Australia recently became the Joint Advanced Tactical Missile’s first foreign client. Taiwan was awarded a $439 million ATACMS production contract. The demand is genuine, wide-ranging, and originating from more than just the U.S. Pentagon.
Lockheed’s primary aeronautics business is where the narrative becomes more convoluted. With $30.6 billion in sales last year, the F-35 continues to be the company’s biggest source of income. In October, management reduced the 2026 Aeronautics outlook by a small amount, citing uncertainty regarding the timing of the next F-35 contract awards. Although there is an initial framework agreement for 850 aircraft over a ten-year period, it takes time to turn frameworks into firm contracts. In the near future, that is the primary risk to be aware of.
Lockheed is valued at between 20 and 21 times earnings, which is less than RTX’s 32 times and roughly comparable to General Dynamics. LMT trades at a discount to its industry average, according to Zacks analysts, and the stock’s recent decline has created a possible entry window for investors with longer time horizons. It may take months to determine whether the political events of November actually result in a tighter defense budget. The $292 billion backlog serves as a significant buffer for the time being.
