Is Lockheed Martin Still a Viable Long-Term Investment?

The question of Lockheed Martin's (LMT) long-term investment viability has gained renewed urgency amid mixed signals from its recent financial performance. While the defense giant faced headwinds in the second quarter of 2025, its third-quarter results and broader business fundamentals suggest a resilient trajectory. This analysis evaluates the tension between short-term challenges and enduring strengths to determine whether LMT remains a compelling long-term bet.

Recent Underperformance: A Temporary Setback

Lockheed Martin's Q2 2025 results were marred by unexpected challenges. The company reported net earnings of $1.46 per share, a figure dragged down by program losses and other charges totaling $1.6 billion and $169 million, respectively. These non-recurring costs, tied to contract adjustments and operational inefficiencies, created a temporary drag on profitability. Such volatility is not uncommon in defense contracting, where large, multiyear programs often face cost overruns or schedule delays. However, the magnitude of these charges raised concerns among investors about the company's ability to maintain consistent earnings growth.

Strong Fundamentals: A Foundation for Resilience

Despite Q2's turbulence, Lockheed Martin's Q3 2025 performance underscored its operational durability. The company reported earnings per share of $6.95, exceeding the consensus estimate of $6.33 by a significant margin. This outperformance was driven by robust sales of $18.6 billion and net earnings of $1.6 billion, reflecting a year-over-year increase in both revenue and profitability. Free cash flow surged to $3.3 billion in Q3 2025, a 57% increase compared to $2.1 billion in the same period in 2024.

The company also demonstrated a commitment to shareholder returns, distributing $1.8 billion through dividends and share repurchases. Notably, Lockheed Martin raised its quarterly dividend by 5% to $3.45 per share and expanded its share repurchase authorization by $2 billion, bringing the total to $9.1 billion. These actions signal confidence in the company's cash-generating capabilities and its ability to reward investors even amid short-term volatility.

Future Outlook: A Record Backlog and Strategic Momentum

Looking ahead, Lockheed Martin's long-term prospects appear anchored by a record backlog of $179 billion and a pipeline of high-priority contracts. Recent awards for programs such as the CH-53K heavy-lift helicopter and the PAC-3 Missile System (MSE) highlight the company's critical role in U.S. and international defense modernization efforts. Analysts project that earnings will grow by 9.39% in the following year, with a trailing EPS of $17.91 for 2025 providing a strong baseline.

The defense sector's structural tailwinds-driven by geopolitical tensions, modernization spending, and a shift toward advanced technologies-further bolster Lockheed's position. Its expertise in areas like hypersonic weapons, space systems, and cybersecurity positions it to capitalize on multi-decade trends.

Conclusion: Balancing Risks and Rewards

Lockheed Martin's Q2 2025 challenges were a temporary blip rather than a systemic issue. The company's Q3 results, coupled with its strategic investments and robust backlog, reaffirm its status as a cornerstone of the defense industry. While investors should remain cautious about near-term volatility, the enduring strength of its business model and the secular demand for its products make LMT a viable long-term investment. For those with a multi-year horizon, the current valuation offers an opportunity to ride out short-term noise and participate in a company poised for sustained growth.