Lockheed to Upgrade Poland's F-16 Aircraft Fleet: How to Play the Stock?

Lockheed Martin Corp. (LMT) recently announced that Poland has finalized an agreement with the U.S. government to modernize its fleet of 48 F-16 aircraft to the advanced F-16V Viper configuration. The company will serve as the prime contractor for the modernization, which includes integration of the APG-83 AESA radar, advanced mission computing, electronic warfare systems and structural enhancements to extend the aircraft’s service life.

This effort, performed in partnership with Polish industry, will bolster NATO interoperability and regional security while supporting local workforce development and reinforcing Lockheed’s long-term investment in Poland’s defense sector.

This modernization contract reinforces LMT’s strategic positioning in the European defense market, potentially enhancing its appeal to investors seeking exposure to established defense stocks with sustained international demand and advanced technological integration.

However, making an investment decision based on a single event is not advisable. So, a prudent investor should conduct a comprehensive evaluation of Lockheed’s recent stock market performance, long-term growth potential, valuation, and any associated risks before making an investment.

LMT Stock’s 3-Month Performance

Shares of Lockheed have lost 6.2% in the past three months, underperforming the Zacks Aerospace-Defense industry’s growth of 10.2% and the broader Zacks Aerospace sector’s rise of 11%. The stock has also lagged the S&P 500’s return of 10.9% during the same period.

On the contrary, LMT’s industry peers, The Boeing Company (BA) and Embraer S.A. (ERJ), have gained substantially in the past three months. Shares of ERJ rose 17.2%, while those of BA grew 10.7%.

Lockheed’s Long-Term Growth Driver

Thanks to its diverse product portfolio ranging from military aircraft to space satellites, Lockheed steadily clinches a solid order flow, which, in turn, culminates in a strong backlog count and bolsters its long-term revenue growth potential. The company recorded a solid backlog of $166.5 million as of June 29, 2025.

Product-wise, the F-35 fighter jet program continues to be a key growth program for Lockheed. The company has delivered 1,199 F-35 airplanes since the program's inception, with 311 jets in the backlog as of June 29, 2025. Currently, Lockheed remains on track to deliver 170-190 of its F-35 jets in 2025. This surely boosts expectation for LMT’s Aeronautics business segment’s sales, which improved 2% year over year in the second quarter of 2025.

Increasing U.S. defense budget also remains a major growth catalyst for the nation’s largest defense contractor. Notably, as part of the fiscal 2026 defense budget request, the U.S. Navy marked its intent to purchase Lockheed’s Patriot Advanced Capability-3 (PAC-3) missiles for the first time, while $400 million has been allotted for production of its Air-Launched Rapid Response Weapon. This should benefit Lockheed’s operating results in 2025 and beyond.

This is further reflected in the Zacks Consensus Estimate for LMT’s long-term (three-to-five years) earnings growth rate of 10.3%.

Now, let’s take a sneak peek at its near-term estimates to check if those mirror a similar growth story.

Near-term Estimates for LMT Stock

The Zacks Consensus Estimate for 2025 and 2026 sales implies an improvement of 4.6% and 3.9%, respectively, year over year.

However, its 2025 earnings estimates suggest a decline of 19.4%. On the other hand, LMT’s 2026 earnings estimate calls for a rise.

The near-term bottom-line estimates for LMT have moved south over the past 60 days. This points to analysts’ declining confidence in the stock’s earnings-generating prospects.

LMT Trading at a Discount

In terms of valuation, LMT’s forward 12-month price-to-earnings (P/E) is 16.28X, a discount to its peer group’s average of 20.04X. This suggests that investors will be paying a lower price than the company's expected earnings growth compared to its peers.

Its industry peer, Embraer, is, however, trading at a premium to both LMT and the peer group average. ERJ is currently trading at a forward 12-month earnings of 24.48X.

Risks to Consider Before Choosing LMT

Despite strong long-term growth prospects, Lockheed holds a poor solvency position, with both its long-term and current debt values exceeding its cash balance amount. Moreover, the current ratio was 0.99 as of June 29, 2025, which, being less than 1, reflects that the company might not have sufficient capital to pay off its short-term debt obligations.

Moreover, labor shortage remains another challenge for Lockheed. Notably, as per the 2025 Workforce Study report released by the Aerospace Industries Association, in collaboration with McKinsey, although the attrition rate in the industry has dropped from a peak of 17% in 2022 to approximately 14.5% in 2024, it remains significantly higher than the average of other U.S. industries that ranges between 2.5% and 7%. Such a higher-than-average attrition rate in the aerospace-defense industry can lead to production delays for aerospace-defense stocks like LMT, BA and ERJ.

Further, LMT’s long-term debt-to-capital ratio is higher than the industry average (as one can see below). Such a high debt-to-capital ratio suggests that the company relies more heavily on debt financing compared to its industry, indicating a higher financial risk and a greater burden on cash flow due to interest payments.

How to Play LMT Stock?

To conclude, investors interested in LMT stock may stay on the sidelines, considering its recent underperformance, declining earnings estimates, elevated debt levels and financial risks tied to a poor solvency position.

However, those who own this Zacks #3 (Hold) stock may continue to do so, given its discounted valuation and long-term growth catalysts.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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