Advance Auto Parts vs. Lockheed Martin: Which Stock Is a Better Buy in 2026?

Are you looking for a turnaround story or a steady defense titan? We compare Advance Auto Parts (NYSE:AAP) and Lockheed Martin (NYSE:LMT) to see which fits your portfolio best for 2026.

Advance Auto Parts provides automotive components for repairs, while Lockheed Martin develops advanced technologies for global security. Retail investors often weigh these types of stocks against one another when balancing a portfolio between cyclical growth and defensive stability. By examining their financials and strategy, you can better understand which of these very different businesses aligns with your financial goals.

The case for Advance Auto Parts

Advance Auto Parts focuses on aftermarket parts for both professional installers and do-it-yourself customers. In its latest annual report, filed in early 2026, the company highlighted a shift toward a core blended-box model following the sale of its Worldpac division. This strategy aims to streamline operations within consumer discretionary stocks and improve its competitive standing in a crowded market.

In FY 2025, revenue reached $8.6 billion, representing a year-over-year decline of approximately 5.4%. Despite the sales dip, the company managed to report a net income of $44 million, resulting in a net margin of approximately 0.5% for the fiscal year. The company is currently implementing a multi-year restructuring plan to optimize its supply chain, reduce costs, and enhance its competitive position in a fragmented market.

As of its January 2026 balance sheet, the debt-to-equity ratio is nearly 2.4x. This metric compares total debt to shareholder equity and indicates a significant reliance on borrowed capital to fund operations. Free cash flow for the year was negative $298 million, defined as cash from operations minus capital expenditures. Its so-called current ratio was 1.7x, indicating an ability to cover short-term debts with assets like cash and inventory.

The case for Lockheed Martin

Lockheed Martin operates as a global leader in aerospace and security technology, primarily serving the U.S. government which accounts for roughly 72% of total sales. Customer concentration like this adds a layer of risk to the business, making it highly dependent on federal budget decisions. The company is also expanding its undersea defense capabilities through a $3.45 billion agreement to buy Ultra Maritime.

In FY 2025, revenue reached approximately $75.1 billion, representing growth of 5.7% over the previous year. This resulted in net income of just over $5 billion. The F-35 program remains the primary revenue driver, contributing nearly 27% of total sales and supporting international partnerships.

As of its December 2025 balance sheet, the debt-to-equity ratio was roughly 3.2x. This ratio measures total debt relative to shareholders' equity, indicating how much a company relies on borrowed money. Free cash flow reached $6.9 billion in the year. The current ratio, which compares assets to upcoming bills, is nearly 2.8x.

Risk profile comparison

Risks include the execution of its 2024 restructuring plan, which expects up to $40 million in charges through 2026 while facing stiff competition from O'Reilly Automotive Inc (NASDAQ:ORLY) and AutoZone Inc (NYSE:AZO). Additionally, the integration of artificial intelligence into operations poses risks if development fails or if competitors like Amazon.com Inc (NASDAQ:AMZN) adopt these technologies faster. Supply chain vulnerabilities remain a constant threat, as reliance on global suppliers exposes the company to potential disruptions from new tariffs or logistical challenges.

High dependency on U.S. government contracts makes the company vulnerable to budget shifts, while large projects like the F-35 carry risks of cost overruns. The company also faces a $4.25 billion lawsuit from SDR Group and competition for contracts from Northrop Grumman Corp (NYSE:NOC) and Boeing Co (NYSE:BA). Furthermore, supply chain issues for semiconductors and international sales subject to strict export controls add layers of complexity and performance risk.

Valuation comparison

Advance Auto Parts currently trades at a lower Forward P/E and P/S ratio than Lockheed Martin. The Forward P/E compares the stock price to future earnings estimates, while the P/S ratio compares price to annual revenue.

Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.

Which stock would I buy in 2026?

Advance Auto Parts is in the midst of turning around the struggles it has experienced over the past few years, including sales growth, margins, and market share. The aftermarket auto parts business has been in a slump, largely due to a mix of factors: weak do-it-yourself demand, vehicle electrification, intense competition, and general pocketbook pressures on consumers.

Company management has been addressing the business's issues by rolling out a new multi-year turnaround program. That started in late 2024, including closing stores, optimizing store footprints, and overhauling its supply chain. To date, the program has largely been a success, especially in the first quarter of fiscal 2026, with results much better than expected: revenue of $2.6 billion and net income of $25 million. Analysts see sales for the full year 2026 a little lower at $8.57 billion, but with improving net income, expected to come in at $167 million, roughly four times 2025.

Lockheed Martin Corp is a core company in the middle of one of the biggest priorities in the U.S.: aerospace and defense. In particular, the F-35 fighter program remains a pillar of Lockheed's business, with the Defense Department planning to continue to buy the jet into the 2040s. Having more than a quarter of revenue essentially guaranteed for 15 years or more is unheard of and quite appealing to a long-term investor.

Advance Auto Parts could be a turnaround story, but its price-to-sales ratio shows deep skepticism on Wall Street. The better bet is to invest in Lockheed Martin, as the Iran war and long-term defense spending trends mean tailwinds for the defense contractor.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Boeing. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.