The Numbers
| Metric | Estimate | Actual | Result |
|---|---|---|---|
| EPS | $7.20 | $7.94 | +10.3% ✅ |
| Revenue | $18.2B | $19.1B | +4.9% ✅ |
| Aeronautics | $7.1B | $8.1B | +14% 🔥 |
| Missiles & Fire | $3.8B | $4.2B | +10.5% |
Market Reaction: +10.54% to $568.59 — biggest single-day gain since April 2024.
Guidance Update
FY 2026 Raised
- EPS: $28.50–$29.20 (was $27.80–$28.50)
- Revenue: $73B–$75B (was $71B–$73B)
- FCF: $6.8B (was $6.2B)
Key Driver: Middle East order influx — classified contracts up $8.2B QoQ.
What Happened
✅ F-35 Ramping Ahead of Schedule
- Delivered 42 aircraft in Q2 (vs 38 planned)
- Production rate now 17/month (target was 15)
- International orders from Poland, Greece accelerated
✅ Middle East Orders Explode
- $8.2B in new classified contracts (Iran war-related)
- Missile defense systems — THAAD, PAC-3 priority
- Backlog now $162B (vs $154B Q1) — record high
✅ Aeronautics Beats Hard
- Segment revenue $8.1B vs $7.1B est (+14%)
- Margin expansion to 11.2% (vs 10.1% prior)
- F-35 + C-130J both ahead of plan
⚠️ Space Flat
- RGS segment missed by 3% — satellite delays
- Not material to thesis — <10% of revenue
Market Reaction
Stock: LMT closed $568.59, up 10.54% (+$54.12). Volume 3.2M (vs avg 1.1M).
Options Flow: Heavy call buying in Aug $600 strikes — street pricing in sustained rally.
ETF Impact:
- ITA (Aerospace & Defense ETF): +3.08%
- PPA (Invesco A&D): +2.39%
- XAR (SPDR A&D): +2.36%
Why This Matters
1. Iran War = Multi-Year Revenue Visibility
If conflict sustains (Trump rhetoric suggests it will), LMT has locked-in revenue through 2028. Missiles, air defense, F-35s — all high-margin, high-priority.
2. Backlog at Record $162B
That’s 2.2x annual revenue. For context, pre-pandemic backlog was ~1.6x. This is unprecedented peacetime demand.
3. F-35 Is Proving Out
After years of delays and cost overruns, the F-35 is finally delivering. 17/month production = economies of scale = margin expansion.
4. Margins Expanding
Aeronautics segment hit 11.2% margins (vs 10.1% prior). Mix shift toward higher-margin programs (F-35, missiles) + production efficiencies.
Risks
1. Peace Breaks Out
If Iran ceasefire happens, order flow slows. But even then, backlog provides 2+ years of buffer.
2. Valuation Extended
P/E ~35 is above historical avg (~28). Multiple compression risk if macro weakens.
3. Supply Chain
Aircraft production still constrained by Tier 2/3 suppliers. Could cap F-35 ramp.
Bottom Line
Best quarter in years. Iran war orders + F-35 ramp = visibility through 2028. Stock ran 10.5% today but thesis intact — if Trump follows through on “largest strikes on Iran yet,” LMT has another leg up. Backlog at $162B, margins expanding, guidance raised.
Entry point? Wait for pullback to $540s or buy calls on dips. Near-term resistance at $590, then ATH $620.
Comp check: RTX +7.3% today on similar thesis. LMT outperformed due to F-35 momentum.
Next Catalyst: Iran escalation over weekend. If military action occurs, Monday gap-up likely. Watch for Pentagon budget updates in Aug — potential upside to FY27 guidance.