Lockheed Martin Stock Outlook: Q2 Earnings Disappointment

Lockheed Martin's stock has underperformed the broader market, plummeting 19.9% over the past year and 8.2% YTD. The company's Q2 results missed expectations, with topline growth of 18 bps YoY and net earnings declining 79.2% YoY. Analysts expect an EPS of $27.66 for FY25, down 2.9% YoY. The stock has a "Moderate Buy" rating with a consensus of nine "Strong Buys," 14 "Holds," and one "Strong Sell."

Lockheed Martin Corporation (LMT) has faced significant headwinds in the past year, with its stock underperforming both the broader market and its sector peers. Over the past 52 weeks, LMT stock has plummeted by 19.9%, compared to the S&P 500 Index's gain of 16.1% [1]. Additionally, the company's stock has declined by 8.2% year-to-date (YTD), despite the broader market's 10% surge [2].

The second quarter (Q2) results released on July 22 further exacerbated LMT's stock performance. The company's top-line revenue grew by a modest 18 basis points year-over-year (YoY) to $18.2 billion, missing street expectations by 2.2%. Meanwhile, net earnings declined by a massive 79.2% YoY to $342 million, and free cash flows turned negative at $150 million, down from $1.5 billion in the year-ago quarter [1].

One of the most concerning aspects of LMT's Q2 results is the significant reduction in its backlog in the aeronautics segment. The backlog stood at $52.2 billion at the end of Q2, down from $62.8 billion in the year-ago quarter [1]. This reduction in backlog could indicate a slowdown in new orders or increased competition from other defense contractors.

For the full fiscal year 2025, analysts expect LMT to deliver an earnings per share (EPS) of $27.66, down 2.9% YoY. The company has a solid history of surpassing street expectations, having done so in each of the past four quarters [1]. However, the recent underperformance and disappointing Q2 results may make it more challenging for LMT to maintain this streak.

The stock has a consensus "Moderate Buy" rating overall, with 24 analysts covering the stock. Of these, nine have given a "Strong Buy" recommendation, 14 a "Hold," and one a "Strong Sell." This configuration is notably less optimistic than two months ago, when 11 analysts gave a "Strong Buy" recommendation [1].

UBS analyst Gavin Parsons maintained a "Neutral" rating on LMT and lowered the price target from $498 to $453 on July 24. As of writing, LMT's mean price target of $491.45 represents a 10.1% premium to current price levels. The street-high target of $670 suggests a staggering 50.2% upside potential [1].

The latest developments at LMT include a $720 million contract from the U.S. Army to produce Joint Air-to-Ground Missiles (JAGM) and HELLFIRE missiles, marking the fourth and final follow-on award under its current multi-year agreement [3]. However, the company continues to face challenges in its Aeronautics segment, with recurring charges totaling $1.8 billion in the second quarter, led by a classified program and two Rotary and Mission Systems projects [3].

BofA analyst Ronald J. Epstein reaffirmed a "Neutral" rating on LMT and lowered his price forecast to $480 from $495, citing ongoing program challenges and limited near-term catalysts [3]. The analyst also lowered his adjusted EPS forecast for 2025 to $21.95 from $27.30, and projections for 2026 and 2027 were reduced slightly [3].

In conclusion, Lockheed Martin Corporation faces significant challenges in the wake of its underperformance and disappointing Q2 results. While the company's Missiles and Fire Control division remains a bright spot, the ongoing program challenges and reduced backlog in the aeronautics segment may continue to weigh on the stock. Investors should closely monitor LMT's ability to resolve these issues and restore investor confidence.

References:
[1] https://www.barchart.com/story/news/34362069/lockheed-martin-stock-outlook-is-wall-street-bullish-or-bearish
[2] https://www.morganvillecoop.com/news/story/34362070/lockheed-martin-stock-outlook-is-wall-street-bullish-or-bearish
[3] https://www.benzinga.com/analyst-stock-ratings/analyst-color/25/08/47264355/big-trouble-at-lockheed-as-classified-program-blowups-trigger-billions-in-losses
[4] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3UD0SA:0-bofa-cuts-lockheed-martin-pt-as-charges-weigh-on-outlook/