Lockheed Martin (LMT): Deal with DoD to Provide Long-Term Demand Certainty, Says UBS

UBS analyst Gavin Parsons reiterated a Neutral rating and $513.00 price target on Lockheed Martin (NYSE: LMT).

The analyst commented, "LMT announced a 7-year agreement with the DoD to accelerate PAC-3 interceptor production to 2,000/yr from ~600/yr currently. The agreement establishes a framework for tripling production by the end of 2030, though doesn't yet include a definitized contract award - this is expected with FY26 appropriations and would be incremental to the $9.8bn PAC-3 award last Sept. Overall, we view the framework as a mutually-beneficial way to support higher investment as it 1) provides LMT with the long-term demand certainty needed to underwrite longer-term investments and 2) lowers risk of higher capex by sharing the upfront capital investment burden with the customer. In return, the DoD shifts the investment risk to industry, shares in cost savings, and can procure higher quantities faster. We believe this is a favorable outcome in comparison to earlier talks of limiting buybacks and government stakes in Defense Primes, though many details remain uncertain and the framework might not be practical for more experimental development programs."

For an analyst ratings summary and ratings history on Lockheed Martin click here. For more ratings news on Lockheed Martin click here.

Shares of Lockheed Martin closed at $522.04 yesterday.

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