1 Magnificent Industrial Stock Down 24% to Buy and Hold Forever
Key Points
Lockheed Martin's stock has fallen to a much cheaper valuation in the last month.
The company is going to steadily grow with its F-35 program, missile defense, and space segments.
Management's capital returns will help with long-term stock price performance.
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The simmering of the Iran war has created some volatility among defense stocks. One defense stock down more than 24% from highs set earlier this year is Lockheed Martin (NYSE: LMT), suggesting a potential buying opportunity for investors. An industrial giant focused on the aerospace and missile sectors, Lockheed Martin has multiple tailwinds in its fighter jets, missile defense, and space systems segments.
With the stock now trading at a much more reasonable valuation, investors can buy Lockheed Martin stock and hold the magnificent industrial giant in their portfolios forever. Here's why.
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Image source: Getty Images.
Betting on a defense supercycle
Lockheed Martin has four business segments: aeronautics, missiles, mission systems, and space. Aeronautics is the steady drumbeat of the operation, with the F-35 fighter jet contracts lasting for decades as they are sold to the United States military and its allies. Over a span of 94 years (from 1994 to 2088), Lockheed Martin and other contractors will potentially earn a cumulative $2.1 trillion from building and servicing the F-35 program. Talk about reliable revenue.
More uncertain areas, but with greater growth potential, are missiles and space. Due to developments in the Ukraine and Iran conflicts and the growing importance of low-earth orbit, the United States military is placing greater emphasis on missile defense and space systems going forward. This includes a new $4.7 billion contract to increase the Patriot missile interceptor production, Golden Dome missile defense contracts, and classified programs. In 2027 alone, the defense department wants to increase its budget to $1.5 trillion.
Overall, the company is in the right areas for the future of defense. It's no surprise that its backlog has grown to $186 billion, close to a record high.
Why Lockheed Martin is a magnificent industrial stock
At its current price after the post-Iran drawdown, Lockheed Martin looks like a great purchase you can set and forget in your portfolio. Revenue is not going to grow explosively like an artificial intelligence (AI) stock, but it doesn't have to for Lockheed to be a long-term winner.
Lockheed Martin trades at a forward price-to-earnings ratio (P/E) of 17, which is close to one of its lowest levels in years. It pays a dividend yielding 2.7% as of this writing, and it has a consistent share repurchase program that has reduced shares outstanding by 24% over the last 10 years alone.
The steady drumbeat of revenue growth combined with dividends and share repurchases will propel Lockheed Martin stock higher over the next decade and beyond. Stay patient and keep this stock as a silent winner in your portfolio.
Should you buy stock in Lockheed Martin right now?
Before you buy stock in Lockheed Martin, consider this:
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
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