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Defense stocks are attracting investor interest in a world marked by rising geopolitical instability, intensifying military activity and a renewed emphasis on national security.
Among the numerous defense companies, Lockheed Martin Corporation (LMT) stands out as a top defense stock, with both strategic relevance and long-term growth potential. As one of the world’s largest defense contractors and a key U.S. Department of Defense supplier, Lockheed Martin is at the forefront of developing cutting-edge fighter jets, missile systems, and space technology. Its extensive defense portfolio and long-term government contracts make it a dependable and potentially rewarding stock for investors seeking stability and growth in the face of geopolitical uncertainty.
Lockheed Martin stock has returned nearly 150% in the last 10 years. So far this year, the stock is down 5.3% compared to the broader market’s 3.8% gain, making now an excellent time to buy this exceptional stock on the dip.
About Lockheed Martin’s Business Model
Valued at $107.8 billion, Lockheed Martin is consistently regarded as one of the world’s largest defense contractors and the leading recipient of U.S. Department of Defense (DoD) contracts. The company operates in four primary business segments:
- Aeronautics: It is the company’s largest and most iconic division, accounting for nearly 40% of total revenue. The segment is divided into four business lines: tactical aircraft, airlift, sustainment, and aeronautical research and development.
- Missiles and Fire Control (MFC): This division creates advanced weapons, precision strike systems, close combat weapon systems, and air and missile defense systems.
- Rotary and Mission Systems (RMS): This category includes naval and radar systems, integrated defense solutions, and helicopters. RMS supports a variety of mission types in the air, sea, and cyber domains.
- Space: The space division is responsible for satellite systems, space exploration vehicles, and missile warning systems.
Rising Global Tensions Are Driving Growth
One of the most obvious consequences of rising global tensions is an increase in defense spending, which is working to Lockheed Martin’s advantage. The company started 2025 on a strong note, with a 4% increase in sales in the first quarter to $17.9 billion, extending a two-year growth trend in sales. Net earnings increased 14% to $7.28 per share.
Lockheed’s MFC segment is emerging as a significant growth driver. Q1 sales increased 13% year-on-year, with a 50% increase in operating profit. The company received more than $2 billion in orders for systems such as the JASSM-LRASM, which is expected to produce 1,100 units per year by 2027. PAC-3, GMLRS, PrSM, and the long-running Fleet Ballistic Missile (FBM) program all contributed to the momentum. The company does not rely solely on the U.S. government. It has a large and growing international customer base, which accounts for 25%-30% of its total revenue. In aerospace, Singapore increased its F-35 commitment to 20 jets, demonstrating international demand resilience and resulting in a 3% increase in segment sales.
Sales in the RMS segment increased by 6%, with radar systems, integrated warfare systems, and BLACK HAWK helicopter volumes driving the growth. However, in the Space segment, sales declined by 2% YoY due to lower OPIR volumes. In the first quarter, free cash flow of $955 million supported nearly $850 million in R&D investments and capital expenditures to stay ahead of the competition.
In the Q1 earnings call, management highlighted that Lockheed’s 21st-century security strategy uses digital technologies to integrate aircraft, satellites, missile systems, and ground assets, with artificial intelligence (AI), 5G, distributed cloud, and open C2 systems at its core.
Lockheed also has one of the most shareholder-friendly policies in the defense sector. It distributed $1.5 billion to shareholders in dividends and buybacks. Lockheed intends to invest more than $10 billion in R&D and capex by 2027, returning at least $18 billion to shareholders. The company pays an attractive dividend that yields 2.9% and has a 22-year track record of increasing dividends. This makes LMT a good choice for both growth and income investors.
Despite the imposition of new Chinese export controls on rare earth elements, management implied that Lockheed is relatively unaffected. The company is legally prohibited from sourcing Chinese materials for U.S. defense products, and it has long-standing contracts with non-Chinese suppliers. Furthermore, U.S. stockpiles and internal sourcing initiatives provide short-term protection, supporting Lockheed’s “anti-fragility strategy” of reducing reliance on adversarial nations for critical raw materials.
CFO Evan Scott confirmed the company’s full-year outlook remains intact, with tariff-related risks mitigated by cost recovery clauses in fixed-price contracts and cost-type structures that adjust for input price shifts. The guidance includes mid-single-digit sales growth, solid 11% segment margins, and around $6.7 billion in free cash flow. The company emphasized that its $173 billion backlog, equivalent to over two years of sales, supports long-term visibility and growth.
What Does Wall Street Say about LMT Stock?
Overall, LMT stock remains a “Moderate Buy” on Wall Street. Of the 23 analysts that cover the stock, 11 rate it a “Strong Buy,” 11 rate it a “Hold” and one says it is a “Strong Sell.” The average analyst target price of $525.50 suggests the stock can rebound and climb by 14.1% from current levels. Plus, the Street-high estimate of $670 implies the stock can rally as much 45.6% over the next 12 months.
The Key Takeaway
Lockheed Martin enters the remainder of 2025 with clear momentum. Its growing missile portfolio, long-term sustainment opportunities, and value-oriented modernization strategy form a compelling blueprint for durable growth, making it an attractive buy amid rising global tensions. Defense spending is often non-cyclical and tends to rise even during economic downturns. Unlike consumer goods or discretionary sectors, military programs are funded through long-term government budgets. This resilience makes LMT a defensive stock.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
