Up 26% in October as Boeing stumbles: What’s powering this defense contractor? RSS CTA

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Investing.com — Defense and aerospace headlines are frequently dominated by political posturing and Washington budget debates, but October’s market action proved that cash flow fundamentals still drive the tape. While Boeing (NYSE:BA) sank 8.3% under the weight of manufacturing crises and balance sheet strain, Lockheed Martin (NYSE:LMT) gained 26.0% in a decisive flight to quality.

The contrast highlights where institutional capital is actually seeking shelter. In an environment shaped by elevated interest rates and geopolitical friction, Wall Street is aggressively abandoning speculative turnaround promises in favor of record contract backlogs, inelastic government demand, and predictable cash conversion.

That flight to fundamental stability defines ProPicks AI’s Top Value Stocks strategy. With the November rebalance now live, Lockheed sits along with an enterprise IT research advisor with 77% contribution margins that rose 18.7% in October alone, an enterprise cloud and automation provider up 14.3%, and an oncology biotech up 38% since entry.

A record backlog behind October’s rally

Lockheed Martin builds the F-35 fighter jet, PAC-3 and THAAD missile defenses and space systems. Its shares jumped about 9% on October 22, when third-quarter EPS of $7.97 beat the $7.52 consensus and sales rose 11% to $20.7 billion, with profit up 15%. The company also raised its full-year guidance again, now targeting sales of $80 billion to $82 billion.

The very same day, Lockheed announced a 10-year framework deal with the Pentagon for at least 850 F-35s, worth at least $78 billion and pending congressional approval. Backlog reached a record $292 billion, up $113 billion from a year earlier, with a book-to-bill ratio of 4.0. The largest contributor was a seven-year PAC-3 contract worth up to $58.6 billion. Missiles and Fire Control sales rose 24% in the quarter, and guidance points to about 20% growth there for the full year.

For 2027, management expects high single-digit revenue growth, with all four segments expanding. CEO Jim Taiclet also cites threats from Russia, Iran and China as lasting, bipartisan drivers of defense demand. That predictability separates Lockheed from Boeing, where the investment case still rests on a turnaround.

Cash flow that supports a 24-year dividend streak

Those sales are converting into cash. Free cash flow reached $3.0 billion in the third quarter and $5.6 billion so far this year, and management targets $7.8 billion to $8 billion for 2026. That supports a dividend Lockheed has paid for 43 consecutive years and raised for the past 24, most recently by $0.15 to $3.60 a quarter.

The balance sheet has strengthened too. Total debt has fallen to $20.5 billion from $22.8 billion at the end of 2025, and the company carries a perfect Piotroski score of 9. InvestingPro’s Financial Health framework, which ranks companies against sector peers on more than 100 indicators, rates Lockheed’s profitability 7.5 out of 10, helped by a return on equity above 80%.

Brokers lifted their targets after the third-quarter beat: UBS to $692 from $653, RBC Capital to $600 from $550 and Bernstein to $633 from $564. The consensus analyst target compiled on InvestingPro is $652.57, with a high of $835.

The Lockheed Martin Pro Research Report shows how far the backlog extends, how much profit turns into free cash flow and how much room that leaves for the dividend.

Finding value beyond the defense sector

Lockheed’s 26% October gain is backed by record orders and strong cash generation, and a $292 billion backlog gives investors years of revenue visibility.

Lockheed is also one of many stocks that ProPicks AI’s data-driven screen re-checks every month. With the November rebalance now live, the stock kept its place in both strategies, alongside large-cap value leaders in IT research, biotech and enterprise cloud software, and the other strategies have refreshed their picks too. Full access to the refreshed November picks across all ProPicks AI strategies costs $9 a month.

The author holds no position in the stocks mentioned. Data and financial metrics as of November 3, 2026.