Why Lockheed Martin Stock Keeps Going Up

Over the past month, UBS analyst Gavin Parsons has upgraded Lockheed Martin's (LMT) stock to a "buy" and set a $674 price target, anticipating a 26% increase. This growth is driven by sales in missiles, munitions, F-35 stealth fighters, helicopters, and Trident nuclear missiles, which are expected to generate a 9% sales growth for the defense company in the coming years. Since Parsons' upgrade on September 8, Lockheed stock has increased by 2.5%, marking its third consecutive day of gains.

Parsons believes that the Missiles and Fire Control (MFC) division will grow by 150% over five years, with sales expected to rise 20% annually through 2030. This growth is estimated to add $7bn, $5bn, and $3bn in revenue to the company's top line through sales of PAC-3 Patriot and THAAD air defense missiles, and JASSM/LRASM attack missiles, respectively. UBS, however, doesn't expect such growth, suggesting that Lockheed Martin could potentially deliver positive earnings surprises for years.

One of the reasons this growth is particularly important for investors is that MFC is Lockheed Martin's most profitable division, with a 13% operating profit margin compared to the company's overall 10.7% profitability. If the company achieves its 20% annual sales growth, profits could grow even faster, at a rate 4% higher than the 17% growth predicted for the rest of Wall Street. With its share price currently below 20 times earnings, Lockheed Martin stock appears to be an attractive buy for investors.