Lockheed Martin downgraded as cash flow concerns cloud defense outlook
Investing.com -- JPMorgan downgraded Lockheed Martin to Neutral, saying its longer-term cash flow outlook looks weaker than the market expects, even as demand across aerospace and defense remains broadly strong into 2026.
Pension-related cash outflows expected in 2027 could limit Lockheed’s ability to grow free cash flow, making consensus expectations for about 8% growth look optimistic. JPMorgan said parts of Lockheed’s portfolio also face revenue pressure and uneven execution, offsetting strength in its missiles business. It set a $515 price target.
The downgrade came alongside JPMorgan’s 2026 outlook for aerospace and defense, which remains positive overall, especially in commercial aerospace.
The bank pointed to large order backlogs at Boeing and Airbus, steady growth in air travel, and an aging global aircraft fleet as key drivers of continued demand for aircraft production and maintenance.
JPMorgan within aerospace favors Boeing, StandardAero and ATI. It said Boeing’s main task remains increasing aircraft deliveries, with a visible path to stronger cash generation later in the decade. It also said demand for engine maintenance remains strong, supporting growth for aftermarket-focused companies.
JPMorgan remained constructive on GE Aerospace and Howmet Aerospace despite sharp share price gains over the past year. It said both companies continue to benefit from strong demand for engines and related services, with scope for further earnings growth.
JPM analysts said global military spending is rising as US allies increase their own defense budgets, creating export opportunities for US contractors. However, it warned that the US defense market has become more complex, with greater emphasis on new suppliers and company-funded investment.
Among defense names, JPMorgan said it prefers L3Harris Technologies in products and Leidos in services, citing clearer growth paths and more attractive valuations compared with larger peers.
