Lockheed Martin (LMT) looks to be "mostly insulated" from tariff risks considering its domestic supply chain and ability to pass through higher costs under its cost-plus and even fixed-price contracts, Morgan Stanley said in a note Wednesday.

The defense contractor reiterated its fiscal 2025 outlook, which appears "conservative," despite stronger-than-expected Q1 results, the firm said.

There are "significant" opportunities ahead for the company due to high international demand for defense products as roughly 30% of its backlog is global, Morgan Stanley said, adding Lockheed is also well-positioned for the Trump administration's "accelerated pursuit" of a Golden Dome missile defense system.

Lockheed is also working on 6th-gen aircraft investments to enhance current platforms, which would provide "cutting-edge capability at a potentially lower cost point," according to the note.

Morgan Stanley moved Lockheed to its top pick in defense as it maintained the stock's overweight rating and $575 price target.

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