What is Lockheed Martin?
Lockheed Martin Corporation (Ticker: LMT) is the world's largest defense and aerospace company. Formed in 1995 through the merger of Lockheed Corporation and Martin Marietta, the company is the Pentagon's largest supplier, providing products ranging from fighter jets to missile defense systems.
Company Overview
| Item | Details |
|---|---|
| Official Name | Lockheed Martin Corporation |
| Ticker | LMT (NYSE) |
| Founded | 1995 (merger) |
| Headquarters | Bethesda, Maryland |
| CEO | Jim Taiclet |
| Market Cap | ~$120 billion (January 2026) |
| Employees | ~122,000 |
Key Customers
- US Government: ~70% of revenue (DoD, NASA, intelligence agencies)
- Allied Governments: ~25% of revenue (Japan, Korea, NATO countries)
- Commercial: ~5% of revenue
Business Structure and Products
Lockheed Martin operates through four business segments.
Business Segments
| Segment | Key Products | Revenue Share |
|---|---|---|
| Aeronautics | F-35, F-22, F-16, C-130 | ~40% |
| Missiles & Fire Control | PAC-3, THAAD, HIMARS, Javelin | ~18% |
| Rotary & Mission Systems | Sikorsky helicopters, radar, training | ~25% |
| Space | GPS satellites, hypersonics, space transport | ~17% |
F-35 Program
The F-35 Lightning II is Lockheed Martin's largest revenue source and the largest weapons program in history.
| Item | Details |
|---|---|
| Program Total Value | ~$1.7 trillion (development, acquisition, maintenance) |
| Planned Production | 3,000+ aircraft |
| Customer Countries | 18 including US, Japan, Korea, UK, Italy |
| Annual Deliveries | ~140-160 aircraft |
| Unit Price | ~$80 million (F-35A) |
Japan Partnership
Japan is the second-largest F-35 customer after the US and a key defense cooperation partner.
- F-35A/B: 147 aircraft planned (42 assembled at FACO Nagoya)
- Aegis System: Radar systems for Aegis destroyers
- PAC-3 Missiles: Ballistic missile defense
Financial Analysis
Let's examine Lockheed Martin's financial position in detail.
Performance Trends
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $67.5B | $71.0B | $74.0B |
| Operating Income | $8.2B | $8.8B | $9.2B |
| Net Income | $6.8B | $7.2B | $7.6B |
| EPS | $27.55 | $30.12 | $32.50 |
| Free Cash Flow | $6.2B | $6.6B | $7.0B |
Backlog (Order Book)
Backlog is a critical metric for defense companies, indicating future revenue.
| Year | Backlog | Revenue Coverage |
|---|---|---|
| 2023 | $156 billion | 2.3 years |
| 2024 | $165 billion | 2.3 years |
| 2025 | $172 billion | 2.3 years |
A backlog exceeding 2 years of revenue demonstrates revenue stability. Long-term government contracts make this business model resilient to economic cycles.
Valuation Comparison
| Metric | Lockheed | RTX | Northrop |
|---|---|---|---|
| P/E Ratio | ~16x | ~22x | ~18x |
| P/B Ratio | ~15x | ~2.5x | ~4x |
| Dividend Yield | ~2.6% | ~2.3% | ~1.5% |
Geopolitics and Defense Demand
Defense stocks are closely tied to geopolitical tensions.
Global Defense Spending Trends
| Region/Country | 2025 Spending | YoY Change | % of GDP |
|---|---|---|---|
| United States | $886 billion | +3.5% | 3.1% |
| China | ~$300 billion (est.) | +7% | 1.7% |
| Japan | $56 billion | +15% | 1.5% |
| NATO Europe | $450 billion | +10% | 2.0% target |
Tailwinds for Lockheed
- Taiwan Strait Tensions: US-Japan alliance strengthening, F-35 & missile demand
- Ukraine Conflict: NATO defense budget increases, ammunition replenishment
- Middle East Situation: Arms exports to Israel and Gulf states
- North Korea Threat: Missile defense system demand
- Hypersonic Race: US-China-Russia development competition intensifying
Japan's Defense Budget Increase
Japan plans to raise defense spending to 2% of GDP by FY2027. This represents significant growth opportunity for Lockheed.
- Counterstrike Capability: Tomahawk missile procurement (~400 units)
- Integrated Air Defense: Aegis system-equipped vessels
- Space & Cyber: Satellite communications, intelligence capabilities
Dividends and Shareholder Returns
Lockheed Martin has 21 consecutive years of dividend increases.
Dividend History
| Year | Annual Dividend (per share) | Increase Rate |
|---|---|---|
| 2022 | $11.60 | +7% |
| 2023 | $12.60 | +9% |
| 2024 | $13.20 | +5% |
| 2025 | $13.80 | +5% |
Shareholder Return Policy
- Dividends: 40-50% of free cash flow
- Share Buybacks: ~$4 billion annually
- Payout Ratio: ~45% (healthy level)
Currency Correlation
Analysis of currency impact for international investors in Lockheed stock.
USD and Defense Stocks Relationship
| Scenario | Geopolitical Risk | USD/JPY | LMT Stock |
|---|---|---|---|
| Crisis Scenario | High | Yen weakening (USD strength) | Rising |
| Peacetime Scenario | Low | Stable | Stable |
| Risk-Off | Mixed | Yen strengthening | Rising (safe haven) |
Investment Methods for International Investors
- US Stock Brokerage Account: Direct purchase on NYSE
- ETF Route: ITA (iShares U.S. Aerospace & Defense ETF)
- Dividend Withholding: 10% US withholding, foreign tax credit may apply
Investment Risks
Let's examine defense-specific investment risks.
Major Risks
- Government Budget Risk: Defense budget cuts, administration changes
- Program Risk: F-35 cost overruns, delivery delays
- Competition Risk: Northrop, Boeing competition
- ESG Exclusion: Weapons manufacturer investment avoidance
- Supply Chain Risk: Parts procurement issues, labor shortage
- Currency Risk: Local currency return decline when USD weakens
F-35 Program Risks
- Engine Issues: Pratt & Whitney engine reliability concerns
- Maintenance Costs: ~$33,000 per flight hour (high cost criticism)
- Technical Challenges: Block 4 upgrade delays
Political Risk
Defense budgets depend on political decisions.
- Democratic Administration: Social spending priority, defense restraint tendency
- Republican Administration: Defense increase tendency (though Trump demands ally burden-sharing)
Investment Decision Points
Key points to consider when investing in Lockheed Martin stock.
Suitable for These Investors
- Long-term investors seeking stable dividend income
- Looking for geopolitical risk hedging
- Seeking stocks resilient to economic cycles
- Believe in long-term defense industry growth
NOT Suitable for These Investors
- Prioritizing ESG investment criteria
- Have objections to weapons manufacturing investment
- Seeking high growth (~5-7% annual growth)
- Dislike government-dependent business models
Investment Timing Guidelines
| Condition | Action |
|---|---|
| P/E below 14x + dividend yield 3%+ | Consider adding |
| P/E 15-18x + dividend yield ~2.5% | Hold |
| P/E above 20x + dividend yield below 2% | Consider taking profits |
Research Priorities by Objective
| Investment Style | What to Verify |
|---|---|
| Dividend/Defensive | Backlog quality, dividend coverage, and program risk |
| Balanced | Defense-sector concentration and political exposure |
| Growth-focused | Organic growth, margins, and capital allocation |
Lockheed Martin has a stable revenue base as the world's largest defense company. In an era of rising geopolitical tensions, defense sector investment can add diversification and dividend income to portfolios. However, ESG considerations and political risks should be factored into investment decisions.
Stock investment carries the risk of losing principal. Please make investment decisions based on your own research and judgment.
References
3- TreasuryDirect (opens in a new tab) U.S. Treasury