Stock Analysis & Valuation Lockheed Martin Corporation (0R3E.L)

• Previous Close: £632.17
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	277.60	-56
Intrinsic value (DCF)	195.03	-69
Graham-Dodd Method		n/a
Graham Formula	223.40	-65

Strategic Investment Analysis

Company Overview

Lockheed Martin Corporation (LSE: 0R3E.L) is a global leader in aerospace, defense, and security solutions, headquartered in Bethesda, Maryland. Operating through four key segments—Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space—the company delivers advanced technology systems, including combat aircraft, missile defense systems, helicopters, satellites, and cybersecurity solutions. With a strong focus on U.S. government contracts and foreign military sales, Lockheed Martin plays a pivotal role in national security and global defense infrastructure. Founded in 1912, the company has established itself as a cornerstone of the industrial-capital goods sector, driving innovation in next-generation defense technologies. Its diversified portfolio ensures resilience in government spending cycles, while its R&D investments maintain technological superiority. Lockheed Martin’s London-listed shares provide international investors exposure to a high-margin, defense-driven business with stable cash flows and long-term contracts.

Investment Summary

Lockheed Martin presents a compelling investment case due to its dominant position in the global defense sector, backed by long-term U.S. government contracts and strong international demand. The company’s $109.4B market cap, stable revenue ($71B in FY 2024), and consistent profitability ($5.3B net income) underscore its financial resilience. A low beta (0.29) suggests defensive characteristics, while a $9.60 dividend per share offers income appeal. However, reliance on government budgets and geopolitical risks could impact future growth. Strong operating cash flow ($6.97B) supports continued R&D and shareholder returns, but high debt ($20.27B) warrants monitoring. Investors should weigh its steady cash generation against potential defense spending fluctuations.

Competitive Analysis

Lockheed Martin maintains a competitive edge through technological leadership, deep government relationships, and a vertically integrated supply chain. Its Aeronautics segment, home to the F-35 program, dominates the stealth fighter market, while its Missiles and Fire Control division leads in hypersonic and precision-strike systems. The Space segment benefits from growing demand for satellite and missile defense infrastructure. Competitors struggle to match Lockheed’s scale in classified programs and systems integration. However, the rise of next-gen defense tech (e.g., AI-driven warfare) poses disruption risks. Lockheed’s reliance on U.S. defense budgets (~70% of revenue) creates concentration risk compared to more diversified peers. Its vertical integration provides cost advantages but may lag in agility versus smaller, innovation-focused rivals. The company’s long development cycles ensure sticky contracts but require sustained R&D investment to maintain superiority.

Major Competitors

• Boeing Company (BA): Boeing is a key rival in military aircraft (F/A-18, P-8) and space systems but faces operational challenges due to commercial aviation setbacks. Its defense segment (~40% of revenue) lacks Lockheed’s focus, though it competes in autonomous systems and satellite launch. Weaker recent execution (737 MAX, Starliner delays) has eroded trust.
• RTX Corporation (RTX): RTX (formerly Raytheon) excels in missiles (Patriot, Tomahawk) and radar tech, directly competing with Lockheed’s Missiles and Fire Control unit. Its Pratt & Whitney division adds propulsion diversification. However, recent engine recalls (GTF) have strained resources, potentially diverting focus from defense R&D.
• Northrop Grumman Corporation (NOC): Northrop specializes in stealth tech (B-21 bomber) and space systems, rivaling Lockheed in classified programs. Its autonomous systems and cyber capabilities are strengths, but smaller scale (~$36B revenue) limits bidding power for mega-projects. Strong in next-gen air dominance but lacks Lockheed’s fighter jet installed base.
• General Dynamics Corporation (GD): GD focuses on naval systems (Virginia-class submarines) and IT services, complementing rather than directly competing with Lockheed’s core segments. Its Gulfstream division adds commercial aerospace exposure. Less reliant on fixed-wing aircraft but trails in missile defense and space infrastructure.
• Airbus SE (AIR.PA): Airbus competes in military transport (A400M) and Eurofighter programs but lacks Lockheed’s U.S. contract dominance. Strong in European defense markets and commercial aerospace, providing diversification. However, geopolitical barriers limit its penetration of U.S. procurement, Lockheed’s core revenue source.