Lockheed Martin Leads Defense Majors on Valuation and Yield Amid Spending Boom

Lockheed Martin (LMT) is presenting a compelling valuation case compared to its peers in the U.S. defense sector, which is benefiting from a sustained increase in government spending. The company trades at the lowest forward price-to-earnings multiple in its peer group and offers the highest dividend yield, according to an analysis of financial data as of Aug. 31, 2026.

Sector-Wide Tailwinds

The U.S. defense industry is experiencing a significant uplift from what analysts describe as a multi-year spending supercycle, reinforced by geopolitical tensions. This environment has been further solidified by recent long-term procurement deals, such as the 7-year framework agreements signed by the U.S. government with General Dynamics (GD) and Lockheed Martin to ramp up production of missile interceptors, including the THAAD and PAC-3 MSE systems.

This increased demand is not limited to the U.S. Expanding defense budgets among NATO-aligned nations and in the Indo-Pacific region are providing a broad and sustained order book for major defense contractors, enhancing revenue visibility for years to come.

A Tale of Four Valuations

While the top four defense primes have collectively grown revenue by $33 billion over the past five years, their current valuations diverge significantly. Lockheed Martin appears relatively undervalued compared to its competitors.

Key metrics for Lockheed Martin include:

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• Forward P/E Ratio: 18.5x, the lowest among the four largest contractors.
• Dividend Yield: 2.4%, the highest in the group.
• Fair Value Upside: An estimated +16.7%.
• Piotroski Score: A perfect 9 out of 9, indicating strong financial health.

In contrast, HWM, another major player, trades at a much higher last-twelve-months P/E of 53.3x, with its valuation suggesting a -28.8% downside to fair value. General Dynamics and RTX fall between these extremes, with forward P/E ratios of 22.0x and 28.8x, respectively.

A Closer Look at Fundamentals

Despite the attractive valuation, Lockheed Martin's profile includes some risks. The company operates with a relatively thin gross margin of 10.2% and maintains a high debt-to-equity ratio of 234%. These factors may warrant consideration from investors.

For those prioritizing a stronger balance sheet, General Dynamics (GD) presents an alternative. The company also benefits from the new missile production contracts but features a much lower debt-to-equity ratio of 35% and has seen positive earnings revisions from 15 analysts. However, its estimated fair value upside is more modest at 5.2%, according to the data.