Lockheed Martin Corporation (LMT)

Every January, Argus identifies specific investment themes that we think will be relevant in the year ahead. This week, we drill down into our sixth theme for 2026: U.S. Competitive Advantage, Aerospace and Defense. This theme was selected before the war in Iran began. Aerospace and Defense design and manufacturing is a core competencies of the U.S. economy. In our view, the sector is positioned for solid growth over the next few years. Defense spending data for 2024 shows that the United States, China, and Russia are the top three spenders globally, with the U.S. spending nearly $1 trillion. Global military expenditure reached a record high of over $2.7 trillion in 2024. Looking ahead, forecasts call for the industry to grow at a CAGR of 6% through 2028. Drilling down, the global airline industry bodes well for commercial aerospace demand over the next several years. Airline passenger levels and airline revenues are growing at a healthy pace -- and with international markets reopened, we believe the industry will be able to recover a substantial amount of its pre-COVID-19 revenues and profitability into 2027. We also expect solid military spending over the next few years, as U.S. spending accounts for nearly 40% of all global military spending. According to the U.S. Bureau of Economic Analysis, annualized federal spending on national defense was running at an $871 billion rate in 2Q25. That's up 6% year over year. On top of the country's typical strong commitment to defense spending, the budget has been influenced by the ongoing Russian invasion of Ukraine, the current war in Iran, rising inflation, and other factors. The current geopolitical environment should keep spending high for some time to come. BUY-rated stocks from the Argus universe that we think are positioned to take advantage of the trend include the following.

Lockheed Martin provides advanced technology systems, products, and services to the U.S. government and international defense customers. The company is organized into four businesses: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space Systems. The shares are a component of the S&P 500. Headquartered in Maryland, the company has about 122,000 employees.

Investors are struggling to determine the right balance when reacting to the conflict in Iran. The uncertainty over the war is dominating the mood on Wall Street. Stocks are lower at midday on Thursday, with the major indices down about 1% on average. The yield on the 10-year note has moved higher and is at 4.14%. Crude oil is surging again and is now near $80 per barrel. The volatility index, the VIX, is at 23.

Lockheed Martin is the world's largest defense contractor and has dominated the Western market for high-end fighter aircraft since it won the F-35 Joint Strike Fighter program in 2001. Aeronautics is Lockheed’s largest segment, which derives upward of two-thirds of its revenue from the F-35. Lockheed’s remaining segments are rotary and mission systems, mainly encompassing the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture.