Al Root
Shares of defense prime contractor Lockheed Martin have underperformed peers as fears about its key F-35 program, losses in its classified business, and shifting U.S. defense policies have kept investors on the sidelines.
Most of that was in 2025. The new year looks brighter, according to Truist analyst Michael Ciarmoli.
Friday, he upgraded shares of Lockheed to Buy from Hold and took his price target to $605 a share from $500.
Lockheed stock was up 4% at $539.19 in midday trading, while the S&P 500 and Dow Jones Industrial Average were up 0.5% and 0.3%, respectively.
"We believe Lockheed Martin's 2025 underperformance, coupled with attractive valuation, creates a compelling risk/reward profile in 2026," wrote Ciarmoli.
Coming into the week, Lockheed stock was up about 3% over the past 12 months, underperforming the iShares Aerospace & Defense ETF by about 56 percentage points.
There were a few reasons for that, which started shortly after Tesla CEO and one-time Department of Government Efficiency head Elon Musk criticized manned fighter jets. The Lockheed F-35 is the premier manned fighter jet in the world, and accounts for about 25% of total company revenue.
There were also some write-downs for classified programs. The stock was whipsawed a few times by changing defense policies that threaten F-35 international sales and Lockheed's ability to pay dividends.
Many of those fears have subsided, added Ciarmoli. "We anticipate improved execution and operational performance in 2026...Ongoing geopolitical tensions should continue to drive demand, supporting program production ramp-ups and new capabilities coming online."
The fears, however, have left Lockheed stock trading for about 18 times earnings expected over the coming 12 months, a 25% discount to other large defense prime contractors.
A low valuation can be an opportunity, but fears continue to affect Ciarmoli's peers. Overall, 32% of analysts covering Lockheed stock rate share Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Lockheed stock is about $535, a little below where shares were trading on Friday.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 09, 2026 11:45 ET (16:45 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments