Will a Surge in US Defense Spending Boost LMT's Prospects?

Lockheed Martin LMT could benefit from the proposed increase in U.S. defense spending under President Trump’s plan, which targets annual military expenditures of around $1.5 trillion by 2027. This represents a substantial jump from nearly $901 billion defense budget approved for fiscal 2026. Such a significant expansion in defense outlays signals stronger long-term funding support for military modernization and procurement programs. 

As one of the largest U.S. defense contractors, Lockheed Martin has deep exposure to key defense areas. An expanded defense budget typically translates into a higher volume of contracts for leading defense primes. LMT derives most of its revenues from U.S. government contracts for platforms, such as F-35 fighter jets, missiles, helicopters and naval systems, positioning it well to capture a meaningful share of any increase in Pentagon spending.

Long-term financial commitments and increased defense budgets would also enable Lockheed Martin to expand its manufacturing capacity. The business might gain longer-term contracts, boost production rates and enhance supply-chain efficiency. Longer contracts would help improve operational planning and lessen revenue unpredictability, especially for high-volume products like military aircraft and missiles.

The proposed increase in military spending still requires approval from the Congress, and final budget allocations may differ from initial proposals. However, the general upward trend in defense spending is expected to result in larger and more frequent contract opportunities for Lockheed Martin, supporting its revenue growth prospects.

Defense Players Likely to Gain From Budget Expansion

Other defense companies which are expected to benefit from the rise in the U.S. defense budget are: 

RTX Corporation RTX stands to benefit from the proposed sharp increase in U.S. defense spending, as higher budgets would support long-term funding for missile defense, radar systems and advanced weapons programs where the company is a key supplier.

Northrop Grumman NOC has a strong position in strategic defense programs — including missile defense, space systems and advanced aircraft — and rising defense budgets should support continued investment in next-generation deterrence and advanced radar, sensor and other high-priority national security programs.

LMT Stock’s Earnings Estimates

The Zacks Consensus Estimate for 2026 earnings per share implies an increase of 33.95% year over year.

LMT Stock Trades at a Discount

In terms of valuation, LMT’s forward 12-month price-to-sales (P/S) is 1.66X, a discount to the industry’s average of 2.76X.

LMT Stock’s Price Performance

In the past three months, the company’s shares have risen 10.5% compared with the industry’s 5.8% growth.

LMT’s Zacks Rank

The company currently has a Zacks Rank #3 (Hold). 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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