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Can Lockheed Martin Continue to Outperform Its Industry in 2025?
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2024 proved to be a thriving year for Lockheed Martin Corp. (LMT - Free Report) in terms of share price performance, backed by multiple growth catalysts, such as notable contract wins, solid revenue and earnings growth, strong cash flow improvement, and key milestones accomplished for some of its critical defense programs. Impressively, America’s largest defense contractor gained 13.2% at the bourses, outperforming the Zacks aerospace-defense industry’s decline of 10.8% as well as the broader Zacks Aerospace sector’s fall of 2% in the year-to-date period.
Image Source: Zacks Investment Research
The company was also successful in beating its defense peers like General Dynamics (GD - Free Report) , Northrop Grumman (NOC - Free Report) and Boeing (BA - Free Report) . GD and NOC’s shares rose 4.1% and 2.6%, respectively, year to date, while BA’s shares lost 37%.
To assert whether Lockheed will be able to continue its prowess in the defense space in 2025 as well, let us focus on the factors that are likely to boost its growth in the coming quarters.
Growing Hostility & Defense Budget to Aid LMT Stock
Global conflicts, such as the protracted Russia-Ukraine war and rising unrest in the Middle East, have long been significant growth drivers for defense contractors like Lockheed Martin. These conflicts have prompted nations — both developed and developing — to increase their defense spending. Consequently, LMT has witnessed a surge in contract flows for its combat-proven defense products, with the United States maintaining its position as the world’s largest weapons exporter.
To meet the rising demand for defense products, the company has expanded its infrastructure, opening an $18 million engineering facility in North Alabama and an advanced manufacturing center in Texas in 2024.
According to the International Institute for Strategic Studies, European NATO members have boosted the share of their defense budgets allocated to procurement and R&D to 32% in 2024, up from 15% a decade ago. Similarly, India, one of the fastest-growing developing economies, has raised its defense budget by 4.5% to $75 billion for fiscal 2024-2025.
Ongoing conflicts in the Middle East, involving countries like Israel, Sudan, Syria and Palestine, are unlikely to abate soon. This sustained instability suggests that the upward trend in global defense spending will likely continue into 2025. Lockheed Martin stands to benefit from this trend, which is also reflected in its robust backlog of $165.69 billion as of Sept. 29, 2024.
LMT Stock’s Solid Shareholder Value
Strong operational cash flows and a stable liquidity position enable companies like LMT to deliver significant returns to shareholders through dividends and share buybacks. During the first nine months of 2024, Lockheed Martin’s operating cash flow rose 7.1% year over year to $5.9 billion. Consequently, as of Sept. 29, 2024, the company distributed $2.28 billion in dividends and repurchased 5.7 million shares valued at $2.7 billion. Looking ahead, Lockheed Martin has $7.3 billion in remaining authorization for share repurchases. In October 2024, its board approved an additional $3 billion for the program, increasing the total authorization to $10.3 billion. These robust buyback plans underscore the company’s strong growth prospects, which are likely to attract more investors.
Furthermore, Lockheed Martin’s impressive return on equity (ROE), outperforming the industry average, highlights the company’s commitment to delivering exceptional shareholder value and reinforcing its appeal as a lucrative investment.
Image Source: Zacks Investment Research
Upbeat Estimates Reflect Solid Prospects
A quick sneak peek at LMT’s 2025 top and bottom-line estimates suggests a respective year-over-year improvement of 3.9% and 5.1%. This further strengthens the stock’s viability to continue to outperform its industry in 2025.
Image Source: Zacks Investment Research
The Upside to Average Price Target Remains Bright
As we can see in the picture below, the current average price target of LMT has an upside of 19.1% from its last closing price. This duly reflects the potential upside that this stock currently holds.
Image Source: Zacks Investment Research
Final Thoughts
To round up, the aforementioned factors specify the potentials that LMT possess to continue its outperformance in 2025. The company currently carries a Zacks Rank #3 (Hold) and a VGM Score of B, further assuring its solid growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, before investing in the stock, one should consider the higher debt-to-capital ratio that LMT possesses compared to its industry.
Image Source: Zacks Investment Research
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Can Lockheed Martin Continue to Outperform Its Industry in 2025?
2024 proved to be a thriving year for Lockheed Martin Corp. (LMT - Free Report) in terms of share price performance, backed by multiple growth catalysts, such as notable contract wins, solid revenue and earnings growth, strong cash flow improvement, and key milestones accomplished for some of its critical defense programs. Impressively, America’s largest defense contractor gained 13.2% at the bourses, outperforming the Zacks aerospace-defense industry’s decline of 10.8% as well as the broader Zacks Aerospace sector’s fall of 2% in the year-to-date period.
The company was also successful in beating its defense peers like General Dynamics (GD - Free Report) , Northrop Grumman (NOC - Free Report) and Boeing (BA - Free Report) . GD and NOC’s shares rose 4.1% and 2.6%, respectively, year to date, while BA’s shares lost 37%.
To assert whether Lockheed will be able to continue its prowess in the defense space in 2025 as well, let us focus on the factors that are likely to boost its growth in the coming quarters.
Growing Hostility & Defense Budget to Aid LMT Stock
Global conflicts, such as the protracted Russia-Ukraine war and rising unrest in the Middle East, have long been significant growth drivers for defense contractors like Lockheed Martin. These conflicts have prompted nations — both developed and developing — to increase their defense spending. Consequently, LMT has witnessed a surge in contract flows for its combat-proven defense products, with the United States maintaining its position as the world’s largest weapons exporter.
To meet the rising demand for defense products, the company has expanded its infrastructure, opening an $18 million engineering facility in North Alabama and an advanced manufacturing center in Texas in 2024.
According to the International Institute for Strategic Studies, European NATO members have boosted the share of their defense budgets allocated to procurement and R&D to 32% in 2024, up from 15% a decade ago. Similarly, India, one of the fastest-growing developing economies, has raised its defense budget by 4.5% to $75 billion for fiscal 2024-2025.
Ongoing conflicts in the Middle East, involving countries like Israel, Sudan, Syria and Palestine, are unlikely to abate soon. This sustained instability suggests that the upward trend in global defense spending will likely continue into 2025. Lockheed Martin stands to benefit from this trend, which is also reflected in its robust backlog of $165.69 billion as of Sept. 29, 2024.
LMT Stock’s Solid Shareholder Value
Strong operational cash flows and a stable liquidity position enable companies like LMT to deliver significant returns to shareholders through dividends and share buybacks. During the first nine months of 2024, Lockheed Martin’s operating cash flow rose 7.1% year over year to $5.9 billion. Consequently, as of Sept. 29, 2024, the company distributed $2.28 billion in dividends and repurchased 5.7 million shares valued at $2.7 billion.
Looking ahead, Lockheed Martin has $7.3 billion in remaining authorization for share repurchases. In October 2024, its board approved an additional $3 billion for the program, increasing the total authorization to $10.3 billion. These robust buyback plans underscore the company’s strong growth prospects, which are likely to attract more investors.
Furthermore, Lockheed Martin’s impressive return on equity (ROE), outperforming the industry average, highlights the company’s commitment to delivering exceptional shareholder value and reinforcing its appeal as a lucrative investment.
Image Source: Zacks Investment Research
Upbeat Estimates Reflect Solid Prospects
A quick sneak peek at LMT’s 2025 top and bottom-line estimates suggests a respective year-over-year improvement of 3.9% and 5.1%. This further strengthens the stock’s viability to continue to outperform its industry in 2025.
The Upside to Average Price Target Remains Bright
As we can see in the picture below, the current average price target of LMT has an upside of 19.1% from its last closing price. This duly reflects the potential upside that this stock currently holds.
Image Source: Zacks Investment Research
Final Thoughts
To round up, the aforementioned factors specify the potentials that LMT possess to continue its outperformance in 2025. The company currently carries a Zacks Rank #3 (Hold) and a VGM Score of B, further assuring its solid growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, before investing in the stock, one should consider the higher debt-to-capital ratio that LMT possesses compared to its industry.
Image Source: Zacks Investment Research