UBS Upgrades Lockheed Martin, Citing Underappreciated Earnings Growth and 28% Upside Potential

UBS has upgraded defense giant Lockheed Martin to a “buy” rating, stating that the company’s strong earnings growth is not being fully appreciated by investors. In a Tuesday research note, the bank raised its price target for the company to $674, indicating a potential 28% gain from Friday’s close.

Analyst Gavin Parsons highlighted that Lockheed Martin is set to experience growth across several key business segments, which could deliver double-digit upside to earnings per share consensus estimates by 2028. Growth in missiles and munitions, F-35 sustainment, the CH-53K helicopter, and the Trident program is projected to drive a 9% revenue compound annual growth rate (CAGR) through 2028.

“This growth trajectory is above consensus and does not appear priced in, given the stock’s current 15% discount relative to the S&P 500,” Parsons wrote. He added that while investors recognize the strong growth in missiles and munitions, the potential for faster and more sustainable production rates is something that the market has yet to price into the stock.

Despite geopolitical tensions, Lockheed Martin shares are only up 8% in 2026, having declined 22% from a peak of nearly 40% gains in early March. The upgrade also stems from growing confidence in the company’s free cash flow (FCF) generation. “While Lockheed Martin needs to normalize its $1 billion pension over-earn, ample free cash flow—despite increased capital expenditures and limitations on buybacks—positions pension funding as a potential use of cash flow,” Parsons noted. UBS models a 38% free cash flow growth from 2025 to 2030, supported by earnings growth.

Analyst sentiment remains mixed. According to LSEG data, 13 of the 24 analysts covering the stock rate it as a hold, while 10 assign a buy or strong buy rating, and one maintains an underperform rating. Following the upgrade, shares of Lockheed Martin rose nearly 1% higher.

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