Key Takeaways
- Lockheed Martin shares jumped 7% after third-quarter EPS of $7.97 beat Wall Street’s $7.52, and the company raised its 2026 outlook for the second quarter in a row.
- Missiles are now Lockheed’s growth engine, with the Missiles and Fire Control backlog roughly tripling this year to $142.5 billion, nearly half of a record $292 billion total.
- Lockheed raised its 2026 free cash flow outlook to $7.8 billion-$8.0 billion, from $7.0 billion-$7.2 billion.
- A framework deal for at least 850 F-35s over 10 years helps, but the Lot 20 contract is costing Lockheed more than the government has funded so far.
Lockheed Martin (LMT) is up 7% today while the broader market falls. The defense giant beat third-quarter estimates, raised its 2026 outlook, and announced a deal with the Pentagon for at least 850 F-35s, all before the open.
What exactly happened
- EPS of $7.97, up from $6.95 a year ago and ahead of the $7.52 consensus
- Sales up 11% to $20.7 billion, with all four segments growing
- Backlog up 27% since the second quarter to a record $292.0 billion
- 2026 guidance raised: sales to $80 billion-$82 billion, EPS to $30.35-$30.75, and free cash flow to $7.8 billion-$8.0 billion (from $7.0 billion-$7.2 billion)
Chairman, President and CEO Jim Taiclet put it this way: “The sustained financial momentum across our portfolio gives us confidence to increase our outlook for sales, earnings per share and free cash flow, the second consecutive quarter we have raised our financial guidance.”
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The missiles are doing the heavy lifting
Most of that record backlog comes from one segment. Backlog at Missiles and Fire Control has roughly tripled since the end of 2025, to $142.5 billion. $52.5 billion of it comes from a multi-year award to build PAC-3 interceptors. The segment’s sales rose 24% in the quarter as production of PAC-3, THAAD and Lockheed’s rocket and strike missiles ramped up.
Analysts expect revenue to keep climbing past this year’s guidance…
Backlog now covers more than three and a half years of sales at the midpoint of this year’s guidance, so nothing in this quarter suggests those estimates will come down.
The F-35 deal still needs real money
Lockheed and the Pentagon announced a framework agreement covering production and sustainment for at least 850 F-35s over the next 10 years. That takes a big question mark off Lockheed’s largest program.
The timing matters. Lockheed says its costs on the Lot 20 advance contract began running past what the government has authorized and funded this quarter. It also says its results and cash flow will suffer without more funding. Contracts for Lots 20 and up are still being negotiated.
The multiple still has room
At yesterday’s close, Lockheed traded at 18x forward earnings, a little above its five-year average of 17x…
After today’s jump it’s closer to 19x, still well below the 23x it hit in October 2024.
My take: a record backlog led by missiles and a much higher free cash flow outlook make this move look earned. The multiple leaves room for more if the F-35 money comes through.
Of course, the framework still has to turn into funded contracts for Lots 20 and up. That’s the thing to watch when Lockheed reports again early next year.
So what is Lockheed Martin stock actually worth?
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