Shares of Lockheed Martin Corp. LMT have plunged 9% in the year-to-date period, underperforming the Zacks Aerospace-Defense industry’s growth of 4.1% and the broader Zacks Aerospace sector’s rise of 4.5%. The stock has also lagged the S&P 500’s fall of 3.3% during the same time period.

Image Source: Zacks Investment Research

On the contrary, a positive share price performance has been offered by other aerospace manufacturers, such as Embraer ERJ and Boeing BA, whose shares have witnessed a surge of 29.4% and 1.2%, respectively, in the year-to-date period.

With the LMT stock sinking recently, individuals may rush to divest it from their portfolios. However, before making any hasty decision, it would be prudent to take a look at the reasons behind the surge, the stock’s growth prospects as well as risks (if any) to investing in the same. The idea is to help investors make a more insightful decision.

What Caused LMT Stock’s Downfall?

In January 2025, Lockheed released its fourth-quarter 2024 results, wherein its revenues worth $18.62 billion lagged analysts’ expectations. The company’s top line also deteriorated 1.3% on a year-over-year basis. This might have hurt investors’ confidence in the stock, leading to the initial downward price movement year to date.

Moreover, over the past few days, some dismal news releases concerning LMT might have exacerbated investor apprehensions about this stock’s prospects, which got duly reflected in its poor share price performance. Evidently, as per some media releases, with U.S. President Trump threatening the nation’s allies with more tariff imposition, a few European nations may feel discouraged from choosing American-made combat jets, especially LMT’s F-35 aircraft, which enjoys a solid demand in the military aerospace industry. Instead, they might turn to local aircraft manufacturers like Dassault for its Rafael aircraft. 

Also, a few analysts from Melius Research and BofA have recently downgraded the rating for LMT stock after the White House and U.S. Air Force announced that they selected Boeing over Lockheed as the winner of the USAF’s Next Generation Air Dominance program. 

Will LMT Stock Recover? 

The global defense industry’s growth outlook remains robust due to heightened geopolitical tensions, leading to increased defense spending worldwide, including military jets as they help nations establish their aerial supremacy. This might have prompted the Morder Intelligence firm to project a CAGR of 3.7% for the global fighter aircraft market during 2025-2030. 

Such market prospects should benefit major military jet makers like Lockheed, Boeing as well as Embraer.  Notably, Lockheed’s F-35 aircraft is currently the most lethal, survivable and connected fighter jet in the world. Currently, LMT aims to deliver 156 of its F-35 jets per year in 2025 and beyond. This is likely to significantly boost the long-term sales prospects for this American combat jet manufacturer. 

A quick sneak peek at its near-term sales estimates mirrors a similar growth story.

Estimates for LMT Stock

The Zacks Consensus Estimate for LMT’s 2025 and 2026 sales implies an improvement of 17.48% and 4.6%, respectively, year over year. 
However, its earnings estimates suggest a mixed performance. LMT’s 2025 earnings estimate calls for a deterioration of 4.6%, while that for 2026 indicates a rise of 9.1%.

On the other hand, the bottom-line estimate for first-quarter and full-year 2025 suggests a downward movement of 2.7% and 2.1%, respectively, over the past 60 days. This indicates analysts’ declining confidence in the stock.

Image Source: Zacks Investment Research

Image Source: Zacks Investment Research

Headwinds to Consider Before Choosing LMT Stock

Despite being a prominent defense contractor, Lockheed faces some notable challenges and one should consider them before adding this stock to their portfolio.  LMT has several contracts with the Türkish industry for the Türkish Utility Helicopter Program (“TUHP”). U.S. sanctions imposed in 2020 affected Lockheed's ability to execute TUHP contracts, leading to force majeure notices. The contracts may be negotiated to be restructured or terminated, either in whole or part. As a result, Lockheed could be at risk of recording significant reach-forward losses in the future.

Moreover, the shortage of labor, especially skilled labor, continues to pose a threat to industry players like Boeing, Embraer and Lockheed. In particular, an aging workforce remains a concern for aerospace manufacturers. According to a study by the Aerospace Industries Association (AIA), 29% of the industry’s employees are above the age of 55, creating a wave of retirements that will impact the industry for 10-20 years into the future. These retirements are estimated to create a projected gap of 3.5 million workers by 2026.  

Considering that aircraft manufacturers have begun to ramp up their production rates following the steady recovery from the pandemic's impacts, labor shortages may prevent LMT from delivering finished products within the stipulated timeline, potentially affecting its future operating results.

LMT Stock’s Higher Debt-to-Capital

LMT’s debt-to-capital ratio of 76.19 is higher than the industry average of 53.11. Such a debt-to-capital ratio suggests that the company relies more on debt financing compared to its industry peers, indicating higher financial risk and a greater burden on cash flow due to interest payments.

Image Source: Zacks Investment Research

What Should an Investor Do?

To conclude, investors interested in Lockheed should wait for a better entry point, considering its higher debt-to-capital ratio, the downward revision in its near-term earnings estimate and dismal performance at the bourses year to date. 

However, those who already own this Zacks Rank #3 (Hold) stock may stay invested as the company’s upbeat sales estimates and solid presence in the global defense industry offer solid prospects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The Boeing Company (BA) : Free Stock Analysis Report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

Embraer-Empresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research