Buying Lockheed Martin on the Dip: Why the Aerospace and Defense Stock is Worth Considering Amid Earnings Miss

Lockheed Martin shares fell nearly 10% after Q2 earnings missed estimates due to a $1.6 billion charge, but analysts remain positive on the stock. Despite the charge, the company reaffirmed its full-year outlook and remains committed to repurchasing $3 billion worth of stock this year. The defense stock pays a 3.13% dividend yield and has a consensus rating of "Moderate Buy" with a mean target of $523, indicating potential upside of 25%.

Lockheed Martin Corporation (NYSE: LMT) reported its second-quarter 2025 earnings on Tuesday, revealing a significant drop in profits due to a $1.6 billion charge related to a classified program within its Aeronautics segment. The company's shares fell nearly 10% in premarket trading, with the stock closing at $460.53, down -1.35% from the previous three months and -8.13% over the last 12 months [2].

The defense giant's net income for the second quarter dropped to $342 million, or $1.46 per share, compared to $1.64 billion, or $6.85 per share, a year earlier [1]. The company's revenue for the quarter came in at $18.2 billion, which was $360 million short of the consensus estimate of $18.58 billion [2]. The EPS of $1.46 was $5.08 worse than the analyst estimate of $6.54 [2].

Lockheed Martin attributed the charge to difficulties with a classified program in its Aeronautics business and certain international helicopter programs in its Sikorsky unit [1]. Despite the significant loss, the company reaffirmed its full-year 2025 guidance for sales and free cash flow, indicating a commitment to its financial targets. The company also stated its intention to repurchase $3 billion worth of stock this year, as well as returning $1.3 billion to shareholders through dividends and share repurchases [5].

Analysts remain positive on the stock, with a consensus rating of "Moderate Buy" and a mean target of $523, indicating a potential upside of 25% [4]. The defense stock pays a 3.13% dividend yield, which is attractive to income-oriented investors.

Lockheed Martin's stock has been under pressure due to supply chain issues and the need to accelerate F-35 deliveries after the first quarter saw reduced production [4]. The company is also facing challenges with its classified programs and international helicopter programs, which have led to significant charges in recent quarters [1].

Despite these challenges, Lockheed Martin remains committed to delivering its critical capabilities to its customers and continues to invest in emerging technologies and infrastructure for growth [5]. The company's focus on operational performance and disciplined capital allocation strategy positions it well to support critical programs like the Golden Dome for America.

References:
[1] Reuters. (July 22, 2025). Lockheed Martin second-quarter profit plummets $1.6 billion charge. Retrieved from https://www.reuters.com/business/aerospace-defense/lockheed-martin-second-quarter-profit-plummets-16-billion-charge-2025-07-22/
[2] Investing.com. (July 22, 2025). Lockheed Martin earnings missed by $5.08, revenue fell short of estimates. Retrieved from https://www.investing.com/news/earnings/lockheed-martin-earnings-missed-by-508-revenue-fell-short-of-estimates-4145651
[3] Investors.com. (July 22, 2025). Lockheed Martin stock tumbled on Tuesday after the defense contractor recorded major pretax losses in its quarterly results. Retrieved from https://www.investors.com/news/lockheed-martin-stock-earnings-q2-2025-rtx-northrop-grumman-defense-stocks/
[4] TradingView. (July 22, 2025). Lockheed Martin Q2 Preview: Budget tailwinds, F-35 spotlight. Retrieved from https://www.tradingview.com/news/gurufocus:bdd7e2ea2094b:0-lockheed-martin-q2-preview-budget-tailwinds-f-35-spotlight/
[5] Lockheed Martin. (July 22, 2025). Lockheed Martin Reports Second-Quarter 2025 Financial Results. Retrieved from https://news.lockheedmartin.com/2025-07-22-Lockheed-Martin-Reports-Second-Quarter-2025-Financial-Results