LMT — Lockheed Martin Corporation

As of 2026-09-13 the tape, not the fundamentals, is setting sentiment: LMT was down 13.6% over the prior month and 18.86% over six months, sitting 24% below its 52-week high of $692 and only 20% above its 52-week low of $437.25, with all three major moving averages (20/50/200-day) stacked overhead within a tight ~$558 band. The operating news in that window was unambiguously good - Q2 2026 (filed 2026-07-23) beat with +10.5% YoY sales growth, $7.94 EPS, $2.92B FCF, $65B of new Q2 orders pushing backlog to a record $230.4B, and management raising FY26 revenue guidance to $79.75-81.75B (~8% growth at the midpoint). Sell-side is not the source of the weakness either: the rating mix is 22 Buys / 14 Holds / 1 Sell, consensus price target sits at $644.86, UBS upgraded to Buy with a $674 target in September 2026 citing accelerating multi-year missile production, and Citigroup lifted its target to $691 in August 2026. The most plausible read is a sector/momentum de-rating of defense primes plus unresolved long-duration questions (the NGAD/6th-generation fighter exclusion, F-35 franchise duration, and lingering memory of the Q2 2025 charge quarter that produced just $342M of net income and $1.46 EPS) - not a business that stopped working.

Revenue inflected from flat-to-negative in 2024 to a genuine upcycle: YoY growth ran +1.3% (Q3'24), -1.3% (Q4'24), +4.5% (Q1'25), +0.2% (Q2'25), then +8.8% (Q3'25), +9.2% (Q4'25), a soft +0.3% (Q1'26) and +10.5% (Q2'26). Quarterly revenue went from the $16.9-18.9B band of 2023-2025 to $20.33B in Q4'25 and $20.06B in Q2'26, so the last three reported quarters are running at a structurally higher level - this is an inflection, not noise. Margins, however, have NOT expanded: stripping out the two one-off program-charge quarters (Q4'24 operating margin of 3.7% and Q2'25 at 4.1%), operating margin has been remarkably range-bound between 11.4% and 13.2% across all twelve quarters (Q2'26 12.4%, Q1'26 11.5%, Q4'25 11.5%, Q3'25 12.3%, Q1'25 13.2%, Q3'24 12.5%). That matters: the dramatic apparent YoY margin and EPS improvement in Q2 2026 is mostly the lapping of the Q2 2025 charge, not operating leverage. EPS followed the same pattern - roughly $6.40-$7.90 in clean quarters, punctuated by $2.22 (Q4'24) and $1.46 (Q2'25) when charges hit; the current run rate of $6.44 (Q1'26) and $7.94 (Q2'26) is solidly in the clean range, and Q2 2026's $7.94 is the best print in the dataset. Cash flow is lumpy by season (Q1 is a working-capital drain: -$291M FCF in Q1 2026 and -$150M in Q2 2025), but the trailing twelve months through 2026-06-28 generated $8.73B of FCF against FY26 guidance of $7.0-7.2B, and the accruals ratio of -2.24% as of 2026-06-28 confirms cash is running ahead of reported earnings - the healthy direction.

As of 2026-09-13, at $524.19 against TTM EPS of $27.31, LMT trades at 19.24x trailing earnings versus its own 5-year average P/E of 19.69x, and 17.2x the $30.42 next-FY consensus EPS (implying ~11% EPS growth). Price-to-sales is 1.57x versus a 5-year average of 1.64x. So on the two cleanest historical anchors, the stock is a hair cheap to fair versus its own history, and the trailing PEG of 0.364 says it is cheap versus its growth rate. The counterweights are real: price-to-book of 13.76x and price-to-cash of 31.96x are extreme, but both are artifacts of a buyback-shrunk equity base of just $8.77B and a cash balance that management deploys rather than hoards - not evidence of overvaluation, though they do mean there is no asset-based downside floor. Debt-to-equity of 2.34x and a current ratio of 1.19 are the genuine balance-sheet facts to weigh. Net: fair value on earnings, mildly cheap on growth, and the 2.53% dividend yield (comfortably covered by ~$7B of guided FCF) is above what this name has typically offered.

This is a pure multiple-compression story, not an earnings problem. Over the six months into 2026-09-13, the shares fell 18.86% while forward EPS estimates moved up (next-FY consensus of $30.42 implies roughly 11% growth off the $27.31 TTM base), which means the market de-rated the multiple rather than marking down the numbers. What the market is refusing to pay for is duration: what happens to Lockheed's growth after the F-35 peaks, given its exclusion from certain 6th-generation/NGAD work, and whether fixed-price development charges like those that crushed Q4 2024 and Q2 2025 recur. What it is getting for free is the record $230.4B backlog and a missile/munitions supercycle that is already showing up as +10.5% revenue growth. The practical read: if Q3 2026 (late October 2026) confirms continued high-single/double-digit revenue growth with the 11-12% margin band intact, the earnings are there and $524 will look like a multiple trough. If instead FY27 guidance disappoints or another charge lands, note that the 52-week low of $437.25 is the only real technical reference point and there is no book-value cushion to catch the fall.

As of 2026-09-13, the chart is in a clean, confirmed downtrend. RSI(14) at 36.87 is weak but not yet oversold (sub-30), and price is below all three major moving averages by a strikingly uniform margin - 6.06% below the 20-day SMA, 5.79% below the 50-day, and 6.07% below the 200-day - which means the averages are compressed into a single overhead resistance zone rather than fanned out, and no timeframe has been reclaimed. The one constructive data point: the 1-week return of -0.21% versus the 1-month return of -13.6% suggests the selling has at least stopped accelerating. Context: the 52-week range is $437.25-$692, so $524.19 sits only about 20% above the low and 24% below the high, and with a beta of 0.104 this drawdown is company/sector-specific, not macro-beta driven. Entry-timing implication: there is no bottoming confirmation yet. Momentum-oriented buyers should wait for a reclaim of the 20-day SMA and an RSI push back above 45-50; longer-horizon buyers are getting a fair (not distressed) price with a 2.53% dividend as compensation for waiting - but should size accordingly, because RSI below 40 with MAs overhead has more often been a continuation setup than a bottom.

• U.S. defense budget and appropriations: the FY27 DoD request and congressional budget negotiations are the single largest directional driver; continuing resolutions delay contract awards and can freeze backlog conversion even when demand is unambiguous.
• Geopolitical demand supercycle: persistent global conflicts are driving multi-year restocking of munitions and missile defense (HIMARS, THAAD, radar), evidenced by $65B of Q2 2026 orders, a $729M HIMARS award to Sweden and a $950M Australian air battle management agreement.
• Sector rotation and rate backdrop: with a beta of 0.104, LMT is not a rate-sensitive stock, but it is exposed to rotation out of defense and other lower-beta dividend payers into higher-beta, AI-adjacent industrials - which appears to be the dominant driver of the six-month price decline.
• Supply chain and labor inflation on fixed-price development contracts: input costs have stabilized versus prior years but remain the mechanism through which lumpy one-off charges (Q4 2024, Q2 2025) get generated.
• Program politics and next-generation franchise risk: outcomes in the 6th-generation fighter competitions and any reshaping of the F-35 program of record will set the growth narrative for the 2030s, well beyond the current backlog.

• Q3 2026 earnings, expected late October 2026: the key checks are backlog conversion rate, munitions/missile manufacturing scale-up, and operating margin health in the Missiles and Space segments.
• U.S. federal budget developments: congressional appropriations and the next DoD funding request are the most likely trigger for a sector-wide re-rating in either direction.
• Continued international order intake on top of the record $230.4B backlog - each additional FMS award (Sweden HIMARS, Australia air battle management being recent examples) reinforces the structural revenue visibility thesis.
• Sell-side estimate and target revisions following the September 2026 UBS upgrade to Buy ($674) and Citigroup's August 2026 move to $691 - a broad re-rating toward the $644.86 consensus target is a mechanical upside catalyst.
• Long-dated R&D positioning such as the September 2026 IBM/ETH Zurich quantum innovation hub in Switzerland - immaterial near-term financially, but supportive of the advanced-technology narrative.

• Fixed-price development contract charges: Q2 2025 demonstrated that a single program charge can cut quarterly EPS from ~$7 to $1.46 and net income to $342M - that exposure has not gone away and is the primary reason the margin trend is not as clean as it looks.
• Long-term franchise risk: exclusion from certain next-generation/NGAD 6th-gen fighter work raises legitimate questions about growth beyond the F-35 peak, and this is the debate the market is currently de-rating on.
• Balance-sheet thinness: stockholders' equity of just $8.77B against $20.54B of long-term debt (D/E 2.34x) and a current ratio of 1.19 means far less cushion than the income statement implies; with P/B at 13.76x there is essentially no asset-based downside support.
• Budget and political risk: continuing resolutions, program cancellations, or a shift in defense spending priorities could delay or eliminate revenue that the backlog currently implies.
• Cost and labor inflation on fixed-price contracts compressing margins in the Space and legacy Aeronautics segments, which would cap the operating leverage the bull case depends on.
• Valuation trap mechanics: with shares at $524.19 already below all major moving averages and 52-week support at $437.25, a guidance miss leaves an unusually thin valuation floor for a large-cap industrial.

This is a good-to-strong business trading at a fair price with a badly behaving stock - the divergence is the whole story. The record $230.4B backlog, raised FY26 guidance ($79.75-81.75B sales, $7.0-7.2B FCF), +10.5% Q2 2026 revenue growth, 17.4% ROIC and a -2.24% accruals ratio (cash ahead of reported earnings) are all real, and 19.2x trailing / 17.2x forward earnings is not expensive for that quality. But the shares are in a confirmed downtrend below all three major moving averages with no bottoming signal, and the structural question - what growth looks like after the F-35 peak given the 6th-gen loss - will not be answered by the next earnings print. Own it for the backlog, the free cash flow and the 2.53% dividend; do not buy it for the chart, and expect the multiple debate to persist.

I applied a 19.0x forward P/E - a modest discount to LMT's own 5-year average trailing multiple of 19.69x, reflecting the unresolved 6th-gen/NGAD franchise question - to the next-FY (2027E) consensus EPS of $30.42, giving $578. Cross-checks landed in the same neighborhood: FY26 guided FCF of $7.0-7.2B works out to roughly $30.4 per share, so a 5.25% FCF yield also implies ~$580, and ~$10.5B of forward EBITDA at 14x EV/EBITDA implies ~$563 per share. That $578 sits about 10% above the 2026-09-13 price of $524.19 and is deliberately below the $644.86 sell-side consensus target, which I view as stale relative to the current multiple regime.