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Lockheed Martin (LMT) beat third-quarter estimates, reached a record $292 billion backlog and raised its 2026 outlook, sending shares up about 9% and lifting defense peers.
- LMT rose about 9% to roughly $603 on Oct. 22 after Q3 sales of $20.7 billion and EPS of $7.97.
- Backlog hit a record $292.0 billion, up 27% from Q2, including a $52.5 billion PAC-3 award.
- 2026 guidance was raised for a second straight quarter: sales of $80-82 billion, EPS of $30.35-$30.75.
Lead
Lockheed Martin (NYSE: LMT) reported third-quarter 2026 results on Thursday, Oct. 22, that beat Wall Street expectations. The company then lifted its full-year forecasts for sales, earnings per share and free cash flow. Shares closed up about 9% at roughly $602.75, from a prior close near $551.51. It was the largest gain among major U.S. defense contractors that session. Quarterly sales rose 11% to $20.7 billion, and net earnings rose 14% to $1.8 billion, or $7.97 per share. Consensus had been near $7.49 per share and $20.4 billion in sales.What Did Lockheed Martin Report for the Third Quarter?
Lockheed Martin reported sales of $20.7 billion, net earnings of $1.8 billion and free cash flow of $3.0 billion, with all four business segments growing year over year. Cash from operations was $3.4 billion.
- Aeronautics: sales rose 13% to $8.2 billion, led by F-35 production.
- Missiles and Fire Control: sales rose 24% to $4.5 billion, driven by PAC-3 and THAAD air and missile defense programs and by tactical and strike missiles.
- Rotary and Mission Systems: sales rose 3% to $4.5 billion.
- Space: sales rose 4% to $3.5 billion.
The earnings beat was wider than the revenue beat. Revenue topped consensus by about 1.4%, while per-share earnings exceeded it by roughly 6%.
Why Did the Backlog Reach a Record $292 Billion?
The backlog reached a record $292.0 billion because of a $52.5 billion multi-year award to produce PAC-3 Missile Segment Enhancement interceptors. Total backlog is up 27% since the second quarter. A backlog is the value of signed orders not yet delivered, and it gives defense contractors multi-year revenue visibility.
The PAC-3 order reflects sustained demand for air and missile defense among the U.S. and its allies. Interceptor consumption in recent conflicts has pushed governments to commit to longer production runs and larger inventories.
The Defense Department also announced a 10-year framework for the F-35 fighter. It covers 850 aircraft at a target rate of 156 jets a year, plus spare parts, modification kits and maintenance support. The framework is not yet a finalized contract. Lockheed Martin said negotiations continue on production lots 20 and beyond, and that costs incurred have begun to exceed the current contractual authorization.
How Did Lockheed Martin Change Its 2026 Outlook?
Lockheed Martin raised its 2026 outlook for the second consecutive quarter. It now expects the following:
- Sales of about $80.0-$82.0 billion
- Diluted earnings per share of about $30.35-$30.75
- Free cash flow of about $7.8-$8.0 billion
Chairman and CEO Jim Taiclet said the company is combining proven systems such as Aegis, the F-35 and Hellfire with digital technologies, including artificial intelligence and autonomy. The outlook implies continued double-digit growth in the fourth quarter, supported by missile production ramps.
Why Did Defense Stocks Rally Together?
Defense stocks rallied because the Lockheed Martin results reinforced the view that multi-year munitions and aircraft demand is translating into revenue and cash flow across the sector. RTX (RTX) gained about 2% to $195.54. Northrop Grumman (NOC) advanced about 3% to $553.29. The iShares U.S. Aerospace & Defense ETF (ITA) rose 0.21% to $206.13, a smaller move that reflects the stock-specific nature of Lockheed Martin's jump.
The shares had already gained roughly 10% over the prior seven days before the report, so the earnings day move extended a run into the print. Sector sentiment has been supported by geopolitical tensions and long-dated procurement commitments.
Strategic Context
The quarter shows a shift in Lockheed Martin's mix. Missiles and Fire Control is the fastest-growing segment at 24%, ahead of the larger Aeronautics unit at 13%. The PAC-3 award also lifts the weight of missile defense in the order book. The F-35 remains the company's largest program, and the unresolved terms for lots 20 and beyond are the main contract uncertainty. Budget cycles and appropriations timing remain the principal sensitivity for the sector.
Outlook
Lockheed Martin enters the final quarter of 2026 with a record backlog of $292 billion, a raised guidance range and an F-35 framework that points to a decade of production. The next milestones are finalizing the F-35 contract terms for lots 20 and beyond and converting the PAC-3 award into deliveries. Peers RTX and Northrop Grumman are positioned to benefit from the same demand for missile defense and munitions.
Mentioned tickers: LMT, RTX, NOC, ITA
