With rising geopolitical tensions, global military spending has been going through the roof. In 2024, global defense spending touched $2.7 trillion, and if the current trend persists, spending is likely to swell to $6.6 trillion by 2035.
From an investment perspective, there seems to be visibility for sustained growth for some top defense companies. Lockheed Martin (LMT) is among the attractive names to consider.
It was recently reported that U.S. President Donald Trump has floated a proposal for a $1.5 trillion defense budget for 2027. This is likely to keep the market participants excited about the defense sector, as positive price action is likely as the order backlog swells for major defense contractors.
Lockheed Martin, headquartered in Bethesda, Maryland, defines itself as a defense technology company. The company operates through four segments that includes aeronautics, space, mission & fire control, and rotary & mission systems.
While the company’s key market is the United States, Lockheed has been spreading its wings with orders from U.S. allies globally. For Q3 2025, the company reported revenue of $18.6 billion and an EPS of $6.95.
With a positive outlook for the defense sector and healthy guidance, LMT stock has trended higher by 17% in the past six months. As defense spending swells, it’s likely that growth acceleration will translate into further upside.
Besides the headline numbers, there are several positives to note in the company’s Q3 2025 results. Lockheed ended the quarter with a record order backlog of $179 billion. The backlog provides clear cash flow visibility. Further, considering the positive industry outlook, it’s likely that the order backlog will continue to swell.
The second point to note is that Lockheed reported free cash flow of $3.3 billion for the quarter. This implies an annualized FCF potential of $13.2 billion. The company has increased share repurchase authorization to $9 billion besides increasing quarterly dividend by 5% to $3.45 per share. With strong cash flow visibility, value creation is likely to be sustained. It’s also worth noting that Lockheed has raised guidance for 2025. The company now expects revenue (mid-range) at $74.5 billion.
