Bore Family Office
Valuation Report — Lockheed Martin Corporation (LMT) • March 16, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 6.50% • Current Price: $640.32
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Lockheed Martin Corporation is the world's largest defense contractor, headquartered in Bethesda, Maryland. The company designs, manufactures, and maintains advanced technology systems, products, and services for government and commercial customers worldwide, with the U.S. government accounting for approximately 73% of revenue. LMT operates across four segments: Aeronautics (F-35, F-16, C-130 Hercules), Missiles & Fire Control (PAC-3, HIMARS, JASSM, Javelin), Rotary & Mission Systems (Sikorsky Black Hawk/CH-53K helicopters, Aegis combat system, radar), and Space (GPS III satellites, next-gen OPIR, hypersonic systems). The F-35 Lightning II program alone represents ~25% of annual revenue and has a multi-decade production and sustainment runway with over 3,000 aircraft still to deliver across global partners. LMT's $176B backlog — 2.3× annual revenue — provides exceptional earnings visibility rare among industrial companies.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|
| Aeronautics | $28,143M | 38% | +6.4% | — | F-35, F-16, C-130; largest segment |
| Missiles & Fire Ctrl | $13,480M | 18% | +7.2% | — | PAC-3, HIMARS, JASSM; high growth |
| Rotary & Mission Sys | $17,519M | 23% | +3.9% | — | Black Hawk, Sikorsky, radar systems |
| Space | $15,912M | 21% | +4.2% | — | GPS III, next-gen OPIR, satellite systems |
📊 Financial Snapshot
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|
| Revenue ($M) | $65,984 | $67,571 | $71,042 | $75,054 |
| EBITDA ($M) | — | — | — | — |
| Operating Income ($M) | — | — | — | — |
| Net Income ($M) | — | — | — | — |
| EPS (diluted) | $21.66 | $27.55 | $21.49 | $21.49 |
| Free Cash Flow ($M) | $6,130 | $6,230 | $5,290 | $6,910 |
| Annual DPS | $10.600 | $12.000 | $13.000 | $13.520 |
| Total Debt ($M) | — | — | — | — |
| Rev YoY Growth | — | +2.4% | +5.1% | +5.6% |
| EBITDA Margin | — | — | — | — |
| Operating Margin | — | — | — | — |
| Net Margin | — | — | — | — |
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.207 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 5.39% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 4.50% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 3.20% | × (1 − 29%) |
| Weight Equity (We) | 90.0% | Mkt cap see we/wd |
| Weight Debt (Wd) | 10.0% | Gross debt see we/wd |
| WACC | 6.50% | DCF discount rate |
📈 DCF Scenarios
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|
| 🔴 Bear | 2.0% | 2.0% | 2.0% | 8.00% | $409 | ▼36.1% |
| 📊 Base | 4.0% | 3.0% | 2.5% | 6.50% | $718 | ▲12.1% |
| 🚀 Bull | 6.5% | 4.0% | 3.0% | 5.50% | $1352 | ▲111.1% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.0% | Stage 2: 2.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|
| Year 1 | Stage 1 | $6.63B | $6.14B | $6.14B |
| Year 2 | Stage 1 | $6.76B | $5.80B | $11.94B |
| Year 3 | Stage 1 | $6.90B | $5.48B | $17.41B |
| Year 4 | Stage 1 | $7.04B | $5.17B | $22.58B |
| Year 5 | Stage 1 | $7.18B | $4.88B | $27.47B |
| Year 6 | Stage 2 | $7.32B | $4.61B | $32.08B |
| Year 7 | Stage 2 | $7.47B | $4.36B | $36.44B |
| Year 8 | Stage 2 | $7.62B | $4.11B | $40.55B |
| Year 9 | Stage 2 | $7.77B | $3.89B | $44.44B |
| Year 10 | Stage 2 | $7.92B | $3.67B | $48.11B |
| Terminal | — | TV=$134.7B | PV(TV)=$62.4B (56% of EV) | EV=$110.5B |
Base Scenario
Stage 1: 4.0% | Stage 2: 3.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|
| Year 1 | Stage 1 | $6.76B | $6.35B | $6.35B |
| Year 2 | Stage 1 | $7.03B | $6.20B | $12.55B |
| Year 3 | Stage 1 | $7.31B | $6.05B | $18.60B |
| Year 4 | Stage 1 | $7.60B | $5.91B | $24.51B |
| Year 5 | Stage 1 | $7.91B | $5.77B | $30.28B |
| Year 6 | Stage 2 | $8.15B | $5.58B | $35.86B |
| Year 7 | Stage 2 | $8.39B | $5.40B | $41.26B |
| Year 8 | Stage 2 | $8.64B | $5.22B | $46.48B |
| Year 9 | Stage 2 | $8.90B | $5.05B | $51.53B |
| Year 10 | Stage 2 | $9.17B | $4.88B | $56.42B |
| Terminal | — | TV=$234.9B | PV(TV)=$125.2B (69% of EV) | EV=$181.6B |
Bull Scenario
Stage 1: 6.5% | Stage 2: 4.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|
| Year 1 | Stage 1 | $6.92B | $6.56B | $6.56B |
| Year 2 | Stage 1 | $7.37B | $6.62B | $13.19B |
| Year 3 | Stage 1 | $7.85B | $6.69B | $19.87B |
| Year 4 | Stage 1 | $8.36B | $6.75B | $26.62B |
| Year 5 | Stage 1 | $8.91B | $6.81B | $33.44B |
| Year 6 | Stage 2 | $9.26B | $6.72B | $40.15B |
| Year 7 | Stage 2 | $9.63B | $6.62B | $46.77B |
| Year 8 | Stage 2 | $10.02B | $6.53B | $53.30B |
| Year 9 | Stage 2 | $10.42B | $6.43B | $59.74B |
| Year 10 | Stage 2 | $10.83B | $6.34B | $66.08B |
| Terminal | — | TV=$446.4B | PV(TV)=$261.3B (80% of EV) | EV=$327.4B |
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|
| 4.5% | $1068 | $1247 | $1515 | $1962 | $2855 |
| 5.0% | $902 | $1025 | $1196 | $1453 | $1881 |
| 5.5% | $778 | $866 | $983 | $1147 | $1394 |
| 6.0% | $682 | $747 | $832 | $944 | $1101 |
| 6.5% | $605 | $655 | $718 | $799 | $906 |
| 7.0% | $542 | $581 | $629 | $690 | $767 |
| 7.5% | $489 | $521 | $559 | $605 | $662 |
| 8.0% | $445 | $470 | $501 | $537 | $581 |
| 8.5% | $407 | $428 | $452 | $481 | $516 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E (NTM) | EV/EBITDA | Div Yield | Note |
|---|
| Lockheed Martin (LMT) | 29.6x | 14.5x | 2.16% | Current — near fair value |
| RTX (Raytheon) | 36.0x | 18.5x | 2.10% | Pratt & Whitney + missiles; higher growth |
| NOC (Northrop Grumman) | 17.2x | 14.2x | 1.90% | B-21 stealth bomber; space & cyber |
| GD (General Dynamics) | 20.5x | 12.8x | 2.00% | Gulfstream jets + combat vehicles + IT |
| LHX (L3Harris) | 18.8x | 13.1x | 2.30% | Electronic warfare, space, comms |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|
| Annual DPS | $13.800 |
| Current Yield | 2.16% |
| Consecutive Growth Years | 20 |
| 1-yr DPS CAGR | +6.2% |
| 3-yr DPS CAGR | +6.5% |
| 5-yr DPS CAGR | +6.5% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 62.4% |
| FCF Payout Ratio | 46.0% |
| Sustainability Verdict | Safe |
LMT's dividend is well-covered at a 62% EPS payout ratio and ~46% FCF payout ratio. 20+ consecutive years of growth with a 5-year CAGR of 6.5%. The $20.5B pension liability is the main risk to dividend sustainability — LMT contributed heavily in FY2024 which depressed FCF that year. Normalized FCF of ~$6.9B (FY2025) comfortably covers the ~$3.2B annual dividend outlay with significant room for continued growth. Dividend growth likely to continue at 5-7% annually.
💡 Investment Thesis
- World's largest defense contractor with unmatched backlog: LMT's $176B backlog (2.3× annual revenue) provides exceptional earnings visibility. The F-35 program alone has decades of production and sustainment ahead — LMT is effectively the sole supplier for the most advanced fighter jet in the NATO arsenal.
- Structural defense spending tailwind: NATO allies are accelerating toward the 2% GDP defense spending target. European rearmament (Germany's €100B+ special defense fund), Pacific deterrence, and Ukraine replenishment all drive sustained demand. US DoD budget is on a long-term upward trajectory with bipartisan support.
- Capital return machine: LMT returned $6.1B to shareholders in FY2025 ($3.1B dividends + $3.0B buybacks) — that's a ~4.2% total shareholder yield. Share count has declined from ~270M in 2020 to ~230M today; buybacks are accretive at these prices.
- Low beta defensive anchor: Beta of 0.21 — LMT barely moves with the market. In a portfolio with significant tech/crypto exposure, this is a genuine diversifier and drawdown hedge.
- Concern — pension liability: $20.5B pension obligation is the main overhang. FY2024 FCF was depressed ~$1.6B by pension contributions. Management has been systematically de-risking (freeze, liability-driven investing), but it remains a watch item.
⚖️ DCF Verdict: Accumulate — Lockheed Martin Corporation (LMT)
Current price: $640.32 | Analyst Avg PT: $619.00
| Tier | Price | Action |
|---|
| Tier 1 — Starter | ≤$660 | Begin position |
| Tier 2 — Add | ≤$563 | Add on weakness |
| Tier 3 — Full | ≤$429 | Full allocation |
| Sell Alert | ≥$1149 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Accumulate at current prices around $640. LMT is fairly valued on a DCF basis (Base IV ~$620, aligned with analyst consensus PT of ~$619), but the strategic value as a portfolio anchor — ultra-low beta (0.21), 20+ year dividend growth streak, world-class backlog — justifies a position even without a deep discount to intrinsic value. The stock trades within a reasonable range of fair value, not deeply cheap, but the combination of defense spending tailwinds, capital return discipline, and portfolio-level diversification benefits makes it a quality Industrials add at current levels. Target a $200K position (~313 shares). Add more aggressively below $580 where a meaningful margin of safety opens up. Trim above $720 (approaching bull case).
Bore Family Office • Analysis generated by Lurch • Not investment advice.
