What Lockheed Martin (LMT) Said on Its Q3 Earnings Call

Key Points

• Lockheed Martin delivered strong Q3 results: Sales rose 11% to $20.7 billion, EPS increased to $7.97, and free cash flow reached $3 billion. Backlog surged to a record $292 billion, supported by a 4x book-to-bill ratio and major missile and defense awards.
• 2026 guidance was raised again as munitions production ramps, with expected sales of $80 billion to $82 billion and free cash flow of $7.8 billion to $8 billion. Missiles and Fire Control led growth, with quarterly sales and profit both up 24%.
• Lockheed is expanding missile-production capacity with new facilities, more than 3,000 planned hires and major supplier contracts, while increasing its dividend 15 cents to $3.60 per share. The company also expects all four business segments to grow revenue in 2027.

Lockheed Martin NYSE: LMT reported double-digit third-quarter growth in sales and profit, generated $3 billion in free cash flow and increased its backlog to a record $292 billion, prompting the defense contractor to raise its full-year 2026 outlook again.

Third-quarter sales rose 11% from a year earlier to $20.7 billion, while segment operating profit increased to $2.2 billion and operating margin was 10.8%, Chief Financial Officer Evan Scott said. Earnings per share were $7.97, up from $6.95 in the prior-year quarter.

“Lockheed Martin delivered another quarter of strong program performance, growing both sales and profit by double digits,” Chairman, President and CEO Jim Taiclet said. He cited performance across the company’s portfolio, including fighter aircraft, munitions, missile defense, autonomy, hypersonics and command-and-control systems.

Backlog Reaches Record as Munitions Demand Expands

Lockheed ended the quarter with backlog of $292 billion, up $113 billion from the third quarter of 2025, and reported a book-to-bill ratio of 4x. Scott said the largest contributor was a seven-year PAC-3 missile contract that brings the potential total value of that multiyear agreement to $58.6 billion.

The company also recorded awards for C-130J aircraft, GMLRS, JASSM and LRASM missiles, F-35 aircraft, Black Hawk helicopters and the Fleet Ballistic Missile program. Among international awards, Lockheed received a $439 million contract to produce Army Tactical Missile Systems for Taiwan’s HIMARS launchers. Its Rotary and Mission Systems unit was also selected to establish an Australian combat-systems integration capability for future Virginia-class submarines.

Taiclet said Lockheed signed a framework agreement with the Department of War to accelerate production of the Joint Advanced Tactical Missile, or JATM, a next-generation air-dominance missile. Australia has committed to become the program’s first international customer, he said.

The company has also signed seven-year agreements for PAC-3 and THAAD interceptors. To support higher output, Lockheed plans to add 2 million square feet of facilities across eight sites during the next three years, with more than half of that expansion already under construction. The company is hiring and training more than 3,000 workers across its Missiles and Fire Control sites this year.

Lockheed has placed substantial supplier contracts as it expands missile production, including a $4.7 billion PAC-3 propulsion supply contract with L3Harris. Since quarter-end, it also awarded Boeing a $14.7 billion contract to triple PAC-3 seeker production and Northrop Grumman a $1.6 billion contract for propulsion and other missile components.

Guidance Raised Again for 2026

Scott said Lockheed now expects full-year sales of $80 billion to $82 billion, representing approximately 8% growth at the midpoint. The forecast was raised from the company’s prior guidance range, primarily reflecting higher Missiles and Fire Control volume tied to munitions production ramps.

• Segment operating profit is expected to be $8.575 billion to $8.675 billion.
• Cash from operations is projected at $10 billion to $10.2 billion.
• Free cash flow is forecast at $7.8 billion to $8 billion.

Third-quarter cash from operations totaled $3.4 billion, bringing the year-to-date figure to $6.9 billion. Free cash flow was $3 billion for the quarter and $5.6 billion year to date. Scott attributed the quarterly cash performance largely to improved working capital and customer receipts in Aeronautics, Missiles and Fire Control, and Space.

Year to date, Lockheed has invested $1.3 billion in capital expenditures and $1.6 billion in independent research and development. Much of the capital spending is being directed toward munitions capacity, Scott said.

The company increased its quarterly dividend by 15 cents to $3.60 per share, marking its 24th consecutive annual dividend increase. Scott also said the acquisition of Ultra Maritime remains on track to close in the fourth quarter after receiving required regulatory approvals. Lockheed expects to fund the transaction with cash on hand.

Segment Results Show Broad-Based Growth

Aeronautics sales increased 13% year over year, supported by higher F-35 volume and the recovery of C-130 pre-contract costs after contract awards. Segment operating profit rose 9%, although unfavorable profit adjustments on F-16 and C-130 programs partially offset the higher volume.

Lockheed lowered its Aeronautics sales outlook slightly to $31.1 billion to $32.5 billion and projected profit of $2.92 billion to $2.95 billion. The revision reflected a shift in expected timing for the next lots of F-35 awards, with the assumed sales benefit now expected in 2027 rather than 2026.

Missiles and Fire Control was the fastest-growing unit, with both sales and profit rising 24% in the quarter. Lockheed now expects the segment to produce 2026 sales of $17.25 billion to $17.45 billion and profit of $2.395 billion to $2.425 billion. The company said it expects the segment to grow both sales and profit about 20% this year.

Rotary and Mission Systems sales rose 3%, driven by radar and command-and-control programs, while operating profit increased 4% following a favorable resolution of a contracting matter. Space sales rose 4%, supported by the Next Generation Interceptor and Fleet Ballistic Missile programs, while profits were comparable with the prior-year quarter.

F-35 Agreement and Development Investments

Taiclet highlighted a recently announced F-35 multiyear agreement that establishes a path to 850 U.S. aircraft over 10 years and total annual production of 156 aircraft for a decade, including allied-country demand. He said the arrangement is intended to improve efficiency in production, sustainment and future modernization.

Scott said F-35 production is currently accretive to both Aeronautics and companywide margins. A Lot 20 agreement, if signed during 2026, would represent upside to Lockheed’s current guidance, he said, although it is not included in the forecast.

The company also continued to emphasize internally funded development. Taiclet said Lockheed will build five Vectis autonomous aircraft with company investment after the Skunk Works team moved from initial drawings to wind-tunnel testing in less than two months. Flight demonstrations are scheduled for next year.

Looking ahead, Scott said Lockheed sees all four segments growing on a revenue basis in 2027 and has a “clear line of sight” to high-single-digit company sales growth next year. Formal 2027 guidance is expected in January.

About Lockheed Martin (NYSE:LMT)

Lockheed Martin Corporation is a global security and aerospace company headquartered in Bethesda, Maryland. Formed in 1995 through the merger of Lockheed Corporation and Martin Marietta, the company develops and produces advanced defense, aerospace, and technology systems for government and commercial customers.

Its principal business areas include Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. Products and services include military aircraft such as the F-35 Lightning II, C-130 Hercules, and F-16 Fighting Falcon; missile-defense and precision-strike systems; helicopters and naval systems; command, control, communications, and intelligence technologies; satellites; space exploration systems; and other classified space and defense programs.

Lockheed Martin serves the U.S.

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