Israel-Iran Feud on the Rise: What Does This Mean for Lockheed?

The long-standing conflict between Israel and Iran escalated recently, with both sides reportedly involved in missile and drone exchanges that caused casualties and property damage. While such hostilities, capable of creating oil market uncertainty and putting upward pressure on global commodity prices, are bad news for the global economy, defense contractors like Lockheed Martin Corp. LMT typically benefit from them. 

Notably, the stock gained a solid 3.6% on 13th June, after the news of Israel’s strike on Iran surfaced, fueling the prospect of a war and thereby boosting the demand for its defense. Interestingly, Lockheed already shares a history with Israel, which is a significant purchaser of its combat-proven defense products, including the F-35 stealth fighter and C-130J Super Hercules aircraft, Multiple Launch Rocket System (MLRS), radars, rockets, fire control and guidance systems, along with a few more equipment. 

Therefore, it's reasonable to anticipate that the renewed conflict between Israel and Iran could lead to fresh orders for Lockheed, America’s largest defense contractor, especially amid the U.S. administration’s heightened focus on the Middle East. Notably, in late May, the Pentagon informed Congress that special fuzes previously supplied to Ukraine are now being redirected to U.S. Air Force units stationed in the region (as per a report by the Wall Street Journal).

The potential upside reflected in LMT’s price target further supports our thesis. Based on short-term price targets provided by 22 analysts, Lockheed’s current high-price target of $670 signals a 43% upside above its average Zacks price target.

Prospects for Other Defense Stocks

Other defense stocks, like Leidos Holdings Inc. LDOS and RTX Corp. RTX, with significant exposure in Israel, also stand to benefit from the fresh exchange of missiles between Israel and Iran. 

Notably, Leidos Holdings partners with leading defense companies and key government integrators in Israel, including Rafael, Israel Aerospace Industries and Israel Airports Authority. The company is an authorized supplier for the Israel Ministry of Defense (“IMOD”) and Project Nimbus. Its shares inched up 0.8% on 13th June. 

RTX’s Raytheon unit, in partnership with Rafael Advanced Defense Systems, helps defend Israel’s populated areas and critical assets with the Iron Dome Weapon System. Notably, the majority of components for the Tamir missile, which is an integral part of the Iron Dome, are procured through the Raytheon supply chain in the United States. RTX’s shares rose 3.3% on 13th June.

The Zacks Rundown for LMT

Shares of Lockheed have gained 2.8% in the past month, outperforming its industry’s 2.5% return.

From a valuation standpoint, LMT is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 17.12X, a roughly 35.2% discount when stacked up with the industry average of 26.41X.

The Zacks Consensus Estimates for Lockheed’s 2025 and 2026 earnings per share have improved over the past 60 days.

LMT currently carries 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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