LMT US - Hold >$534. Accumulate $485-$534, STP < $485. Q2 Very Strong Indeed.
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Analysis by Alex King for Cestrian Capital Research, Inc.
DISCLOSURE: Cestrian Capital Research, Inc staff personal accounts hold long position(s) in $LMT.
Summary
Lockheed Martin is an easy stock to own if you are patient. Save for a big ole swoon as the Berlin Wall came down, the stock has been only-up if you have an attention span longer than the average. You can open a full page version of this long-run log scale chart, here.
Q2 26, printed today before the New York open, was a banger. It delivered a big improvement in backlog (+38% YoY), revenue growth (accelerated to +7.2% on a TTM basis, that’s pretty good growth for a defense prime), cashflow margins (now +12% on a TTM unlevered pretax FCF basis) and net leverage (down to 1.5x TTM EBITDA, which is really nothing). The stock responded accordingly, presently up 11% on the day. At the current price we rate at Hold, meaning, Hold, not meaning Sell, because if we meant Sell we would rate it at Sell. As a reminder we are a buyside shop and are thus free to say what we like without concern for our next capital markets sellside opportunity. Should the stock retrace back towards the 200-day moving average, in the $540 zip code, we would flip rating back to Accumulate. A drop below $485 would invalidate the bull thesis.
How To Use Our Work
A little detour before we get to the numbers and charts and whatnot. If this is your first time reading our LMT coverage, nevermind, you missed the pre-earnings signal but you’ll be around for the next one I hope. The pre-earnings signal from Lockheed was in the price x volume indicator.
The great benefit of using price x volume analysis over the longer term is as for order flow analysis in the shorter term ie. you can see where buys and sells have actually taken place, as opposed to guessing based on some Crayola type charting.
The accumulation volume building below the 200-day moving average at LMT was the driver for my own most recent purchase of a position in the stock - announced prior to the trade being placed to our Inner Circle subscribers as always.
Today's +11% pop took that position nicely into the money. Here’s how the stock looks to my eye at present. You can open a full page version, here. The accumulation going on below the 200-day SMA is clear.
Incidentally I took a small loss on my last attempt at this trade. The 22 June dump tripped my trailing stop from a 1 June entry.
We post all these real-money trades, before the trades are placed, for our Inner Circle members. We also post the outcomes, win lose or draw - this is a no-furu zone.
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Alright let’s get on with it.
Financial Fundamentals
Defense primes don’t often deliver game-changing quarters like this one. You can thank the general re-armament of the world for this; defense budgets are rising worldwide and whilst it’s true that European customers are likely to spend a higher % of those budgets on native European vendors, it’s also true that you can’t decouple from the US primes very quickly, or indeed at all. We have covered LMT for a very long time and I don’t recall ever seeing such a sizable jump in backlog.
In defense primes, the one number that matters beyond any other in their earnings prints is backlog. Everything else flows from that. Backlog growing faster than revenue, likely the future is bright. Backlog growing slower than revenue or, worse, falling, likely there are troubles ahead.
In the recognized financials (backlog isn’t a GAAP concept remember) all is also good. Growth accelerated, margins rose and leverage came down to a level not seen for almost three years. In short: looking good.
Valuation Multiples
Inexpensive, I would say.
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Cestrian Capital Research, Inc - 23 July 2026.