Lockheed Martin Corporation (LMT)

Q2 2026 Earnings Preview

1. Earnings Preview

Key Takeaway: The setup is modestly constructive — consensus is a manageable bar after Q1's miss reset expectations, and the single biggest swing factor is whether MFC missile ramp momentum (PAC-3, THAAD, JASSM/LRASM) can offset continued Aeronautics margin drag and deliver the free cash flow inflection management promised for Q2.

Heading into Q2 2026, the bar for Lockheed Martin looks achievable but not easy. Consensus EPS of ~$7.31 (operating) and revenue of ~$19.3B represent roughly 6% year-over-year top-line growth — a step up from Q1's flat print — and management explicitly guided for "successive sales and margin growth throughout the year" with Q2 as the first meaningful inflection point. The guidance posture is unchanged and confident: full-year 2026 targets (mid-single-digit sales growth, segment profit $8.4–$8.7B, FCF $6.5–$6.8B) were reaffirmed in April, and IRS favorable guidance on the Corporate Alternative Minimum Tax nudged management toward the upper end of the FCF range. Estimate revisions have been modestly positive since the Q1 print — Q2 EPS consensus has drifted from ~$7.12 to ~$7.31 over the past 13 weeks — suggesting the Street is gradually gaining confidence in the ramp trajectory rather than fading it. The stock, however, has underperformed: LMT is down ~3% since the Q1 print versus ITA roughly flat and SPY up ~5%, implying the multiple has compressed and the stock is not pricing in a beat, which creates an asymmetric setup if MFC delivers. The key wildcard is free cash flow conversion: Q1 FCF was a use of $291M (ERP system disruption), and Q2 is the quarter management promised resolution — a clean FCF print above $800M–$1B would be the most powerful positive catalyst, while another shortfall would re-open the debate about the full-year $6.5–$6.8B target.

2. KPIs & Consensus Expectations

Key Takeaway: Consensus is a manageable but not low bar — revenue growth of ~6% YoY is achievable given backlog conversion, but free cash flow is the bigger swing factor: Q2 is the quarter management promised the Q1 ERP disruption resolves, and any shortfall would pressure the full-year $6.5–$6.8B guide.

Table 1 — Q2 2026 Current Quarter Snapshot (All Key KPIs)

Source: Visible Alpha Consensus and Actuals Data. All consensus figures as of July 22, 2026. Q2 2025 Aeronautics operating profit was negative due to a large unfavorable EAC adjustment on the F-35 program; Q2 2026 consensus reflects normalization. FCF full-year consensus of ~$6.30B sits ~5% below the guidance midpoint of $6.65B, reflecting residual skepticism about the classified program cash burn ($500–$700M/year) and elevated CapEx ($2.5–$2.8B).

Table 2 — Beat/Miss History (Last 8 Quarters, Top 2 KPIs: Operating EPS & Net Sales)

Source: Visible Alpha Consensus and Actuals Data. Pattern: LMT has beaten operating EPS in 6 of the last 8 quarters, with the lone miss being Q1 2026 (impacted by non-recurring prior-year items and ERP disruption). Revenue beats are less consistent — LMT has missed net sales in 4 of the last 8 quarters — suggesting the Street tends to over-estimate near-term revenue while under-estimating EPS (mix/margin benefit). Q2 2026 consensus appears set at a level where a modest beat on EPS is more likely than not, but revenue is the tighter call.

3. Guidance & Commentary Evolution

Key Takeaway: Full-year 2026 guidance is unchanged since January, but management's tone has shifted incrementally positive — IRS CAMT ruling nudges FCF toward the upper end of the range, F-16 deliveries resumed, and classified program confidence is at a multi-year high.

4. Guidance vs. Estimate Revision Tracker

Key Takeaway: Estimates have drifted modestly higher since the Q1 print — Q2 EPS up ~$0.19 (+2.7%) and FY EPS up ~$0.25 (+0.8%) — suggesting the Street is gradually building in MFC ramp confidence. Revenue estimates are essentially flat, consistent with guidance, while FCF consensus remains ~5% below the guidance midpoint, representing the key gap to close.

Source: Visible Alpha Consensus and Actuals Data. The notable divergence is in Q2 FCF: the post-Q1 baseline consensus was $1.27B, but current consensus has drifted down to $0.86B — the Street is not fully pricing in the ERP resolution management promised. A Q2 FCF print above $1B would be a meaningful positive surprise and would likely drive upward revision to the FY FCF consensus, which currently sits ~$350M below the guidance midpoint.

5. Stock Performance

Key Takeaway: LMT has underperformed both ITA and SPY since the Q1 miss — down ~3% vs. ITA roughly flat and SPY +5% — driven almost entirely by multiple compression (EV/EBITDA contracted from ~13.2x to ~11.7x over 3 months) as the Q1 miss and FCF shortfall reset sentiment. The stock is not pricing in a beat, creating a favorable asymmetric setup.

The chart below shows LMT, ITA (iShares U.S. Aerospace & Defense ETF), and SPY (S&P 500) indexed to 100 at the Q1 2026 earnings date (April 23, 2026). Key events are marked with vertical dashed lines.

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LMT vs. ITA vs. SPY — Indexed to 100 at Q1 2026 Earnings (April 23, 2026). LMT: dark navy solid; ITA: mid-grey dashed; SPY: light grey dashed. Key events: (1) Q1 2026 Earnings Miss — Apr 23; (2) PAC-3 $4.8B UCA Signed — Apr 23; (3) Bernstein Conference (CEO/CFO) — May 27; (4) Iran Ceasefire Collapse / Renewed Strikes — Jul 8–14; (5) NOC Q2 Beat & Guidance Raise — Jul 21. Source: Yahoo Finance / Stock Price Data.

Source: Yahoo Finance / Stock Price Data. LMT is down ~2.9% since the Q1 earnings date vs. ITA +5.5% and SPY +5.5%. The stock's underperformance is driven by multiple compression — NTM EV/EBITDA contracted from ~13.2x (3 months ago) to ~11.7x currently — rather than estimate cuts (EPS estimates are actually up modestly). The stock briefly outperformed in early June as Iran conflict escalation drove defense sentiment, but gave back gains in late June as the ceasefire temporarily reduced geopolitical risk premium. The stock is now trading at a meaningful discount to its recent range, setting up a favorable risk/reward into the print.

6. Material News & Developments

Key Takeaway: The most important development since Q1 earnings is the announcement of the PAC-3 ACE lower-cost interceptor (July 20) — a new product that directly addresses the military's demand for affordable, high-volume air defense munitions and could represent a significant incremental revenue opportunity beyond the existing PAC-3 MSE ramp.

• July 20, 2026 — LMT Announces PAC-3 ACE (Adapted Capability Effector): Lockheed unveiled a new lower-cost Patriot interceptor (PAC-3 ACE) costing less than half the ~$4M PAC-3 MSE price, targeting cruise missiles and short/medium-range ballistic threats. Initial production could start within 36 months, with U.S. and European industry partners. Implication: Directly addresses the military's stated need for affordable, high-volume interceptors; could open a new revenue stream alongside the existing MSE ramp and expand the addressable market significantly.
• July 13, 2026 — L3Harris Wins $955M Golden Dome Satellite Contract: L3Harris secured a Space Development Agency contract for 18 missile-tracking satellites for the Golden Dome shield. Implication for LMT: Validates Golden Dome program momentum; LMT is a key integrated air and missile defense player and stands to benefit from broader Golden Dome spending, though this specific award went to LHX.
• July 15, 2026 — Trump Presses Defense Executives on Production Acceleration: Reuters reported Trump urged top defense executives to accelerate weapons production, with ~$20B in private investment tied to Patriot system expansion. Pentagon using long-term procurement contracts to de-risk factory investment. Implication: Directly supportive of LMT's PAC-3/THAAD ramp narrative; government commitment to long-term contracts reduces capital risk.
• July 11–20, 2026 — Iran Conflict Escalation / Ceasefire Collapse: U.S.-Iran military conflict resumed with multi-day strike campaigns; Pentagon faces budget shortfall from Iran war costs; House passed $1.15T defense policy bill (July 22). Patriot missile demand surging globally. Implication: Structurally positive for LMT's PAC-3, THAAD, JASSM/LRASM, and F-35 demand; near-term budget pressure could create timing uncertainty on new contract awards.
• July 21, 2026 — NOC Q2 2026 Beat & Guidance Raise: Northrop Grumman reported strong Q2 results (sales +5% YoY, book-to-bill 1.84x, record $105B backlog) and raised FY 2026 guidance. NOC also confirmed completing PAC-3 SRM qualification and signing a $2B framework agreement with DoW and Lockheed Martin. Implication: Strong positive read-through for LMT's defense demand environment and PAC-3 supply chain expansion.
• July 20, 2026 — Trump Executive Order on Defense Supply Chain Screening: EO requires defense contractors to map supply chains from raw materials to final products and eliminate foreign supplier vulnerabilities (particularly China). Implication: Compliance cost headwind for LMT; however, LMT's existing supply chain diversification efforts (targeting 2–3 sources per component) position it relatively well.
• July 21, 2026 — LMT UK Integrated Air Defense Partnership: Lockheed Martin highlighted its role in the UK's plan to build an integrated air, space, and missile defense operations center. LMT has operated in the UK for 85 years. Implication: Reinforces international demand narrative; potential future contract opportunity.
• May 27, 2026 — Bernstein Conference (CEO Taiclet & CFO Scott): LMT CEO and CFO participated in Bernstein's 42nd Annual Strategic Decisions Conference. No specific guidance changes disclosed; conference served as a platform to reinforce the production ramp and framework agreement narrative.
• May 12, 2026 — Annual Shareholder Meeting: Shareholders elected directors and rejected an independent chairman proposal. No material financial updates.

7B. Northrop Grumman (NOC) — Bernstein Strategic Decisions Conference (May 28, 2026)

Read-Through Strength: STRONG — Commentary directly addresses Q2 2026 in-quarter demand, PAC-3 ramp, and F-35 outlook.

7C. L3Harris Technologies (LHX) — Bernstein Strategic Decisions Conference (May 27, 2026)

Read-Through Strength: MODERATE-STRONG — L3Harris is a key LMT supply chain partner (solid rocket motors for PAC-3/THAAD); commentary on missile production ramp and supply chain is directly relevant to LMT's Q2 execution.

7D. HII (Huntington Ingalls Industries) — Bernstein Strategic Decisions Conference (May 28, 2026)

Read-Through Strength: LIMITED — HII is primarily a shipbuilder with limited direct overlap with LMT's core segments. Commentary is included for completeness on defense budget and labor market themes, but most items are company-specific.

7E. RTX (Raytheon Technologies) — Note on Availability

Read-Through Strength: NOT AVAILABLE — RTX (Raytheon Technologies) is scheduled to report Q2 2026 results on July 23, 2026 (same day as LMT), so no Q2 results are available as a pre-earnings read-through. The May 29 Bernstein transcript in the research database was for a different company. The July 9 preliminary results document was for Rackspace Technology (a cloud company), not Raytheon — this is a data labeling issue and has no read-through to LMT.

Watch for RTX Q2 commentary on: Patriot launcher demand (RTX makes the launcher; LMT makes the interceptor), LTAMDS radar production timeline, international missile defense orders, and any commentary on the PAC-3 ACE development partnership with LMT.

7F. Peer Commentary Summary — Key Themes for LMT Q2 2026

8. Insider Transaction Activity

Key Takeaway: No open-market insider purchases or sales (Form 4 codes P/S) were identified for LMT in the April 23 – July 22, 2026 window. The absence of insider selling is a mild positive signal — no insiders are taking advantage of any price recovery to exit — but the absence of buying is also notable given the stock's underperformance since Q1. Nothing stands out as a meaningful signal either way.

Data source: SEC Form 4 filings database queried for LMT, April 23 – July 22, 2026, transaction codes P (open-market purchase) and S (open-market sale). No transactions matching these criteria were returned. This is consistent with LMT's historical pattern of limited insider open-market activity; executive compensation is primarily delivered through equity grants (code A) and 10b5-1 planned sales, which are not indicative of discretionary conviction.