This Defense Giant Stock Is Entering A Major Upgrade Cycle

Some companies are cyclical. Some companies are speculative.

And then there are companies like Lockheed Martin (NYSE: LMT) where demand doesn’t depend on consumer trends, interest rates, or market sentiment.

Lockheed is one of the world’s most strategically essential defense contractors, and today the stock sits in a rare position: rising backlog, accelerating global orders, a historically cheap valuation, and a multi-year aircraft upgrade cycle about to kick off.

This is one of the simplest long-term bull cases in large caps. It’s no wonder the stock is A rated according to our Zen Ratings system. After taking a closer look, I think there are even more overlooked catalysts that make the next decade potentially stronger than the last.

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The Global Defense Spending Tailwind Isn’t Going Anywhere

The world is in the most geopolitically tense period since the Cold War.

NATO is rearming. Japan is doubling its defense budget. Even Europe is arming itself. The U.S. is shifting resources toward the Pacific. The Middle East remains unstable. And missile stockpiles globally are depleted.

This is not a temporary spike in budgets … It's a structural reset.

That makes Lockheed Martin, with heavy exposure to missiles, aircraft, and integrated air defense, one of the clearest beneficiaries of a global rearmament cycle that will likely last for years.

A Record Backlog: $179B+ of Contracted Revenue and Visibility

Lockheed currently holds over $179+ billion in backlog … the highest in company history.

This backlog represents:

• multi-year aircraft orders
• missile programs
• sustainment and modernization contracts
• guaranteed government funding

More than 92% of revenue comes from government contracts. This is as close to predictable cash flow as you’ll find in the equity market.

In an environment where investors crave stability, Lockheed has it in spades.

The F-35: Moving From “Production Story” to “Platform Story”

Here’s where the thesis gets more interesting.

The F-35 isn’t just the largest weapons program in U.S. history … it’s transitioning into its most important upgrade phase ever. Think of it like this:

• The F-35 is going from an iPhone 6 to an iPhone 12: the same shell, but meaningfully upgraded internals.

The upcoming modernization cycle includes:

• Tech Refresh 3
• Block 4 upgrades
• new radar systems
• enhanced electronic warfare capabilities
• improved mission-computer processing
• expanded data fusion and multi-domain integration

This refresh creates a massive, recurring revenue wave as the 1,000+ F-35s already in service undergo modernization.

Most investors don’t appreciate this: the F-35 upgrade cycle is a multi-year earnings tailwind that is already funded and already inevitable.

A Surprisingly Attractive Valuation

Lockheed trades at just ~15x forward earnings … below its historical average and well below comparable industrials and defense primes. It scores a B according to our Value Component Grade, which also weighs enterprise value, cash flow yield, and more.

This valuation implies stagnation. The fundamentals say the opposite.

And so do analyst price targets for LMT, which predict a 12-36% move in the next 12 months:

For more Value strategies, check out Zen Strategies … Our Value portfolio is focused on 21 unique measures of value that pinpoint underappreciated stocks that are ready to rise.

LMT also scores an A on one of its Component Grades. Click here to see which one.

My Take?

Lockheed Martin is one of the most durable compounders in the market, with a record backlog, expanding global demand, and the F-35 entering its largest upgrade cycle ever. All at a below-average valuation.

For investors looking for “safe growth” in an uncertain world, this may be one of the clearest cases.

Click here to add LMT to your watchlist.

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