Defense Stocks Surge as Tech Shares Fall Ahead of Lockheed Martin Earnings

In a significant market shift, defense stocks experienced a notable surge while technology shares declined. Lockheed Martin's stock price climbed 8% over the past week, closing Friday at $552, with a 3.7% jump on the final trading day. This rise occurred as tech stocks fell sharply and Brent crude oil reached $110 per barrel amid tensions in the Strait of Hormuz. Other defense companies also saw gains, with Northrop Grumman up over 8% for the week and RTX, the parent company of Raytheon, adding 3.7% on Friday. European defense stocks also moved against the general market trend.

These gains come after a challenging period for the defense sector, where stocks had previously fallen as much as 48% from their peaks. Lockheed Martin itself had dropped below $500 earlier in the month and remains about 18% below its March high of $677. Investors are now looking ahead to Lockheed Martin's third-quarter earnings report, scheduled for release before the New York market opens on Thursday. A conference call with CEO Jim Taiclet and CFO Evan Scott will follow at 3:30 PM Israel time.

In the second quarter, Lockheed Martin reported sales of approximately $20.1 billion, an 11% increase year-over-year, and a net profit of $1.8 billion, or $7.94 per share. This compares favorably to the same quarter last year, when the company posted losses of about $1.6 billion. The company raised its full-year forecast in July, now expecting sales between $79.75 and $81.75 billion and earnings per share between $29.95 and $30.65.

Lockheed Martin's order backlog reached a record $230 billion at the end of June, up from $194 billion at the end of 2025. A substantial portion of this growth is attributed to a $35 billion multi-year contract with the Pentagon's Missile Defense Agency for THAAD interceptors, a system also deployed in Israel. The missiles and fire control division, which produces Patriot missile interceptors, saw its sales increase by 19% to about $4.1 billion, marking the fastest growth among its four divisions. The F-35 program's performance was mixed, with 19 aircraft delivered in the second quarter compared to 50 in the prior year's quarter, though revenues from the program increased due to higher production values in manufacturing contracts. The aeronautics division, which includes the F-35, grew by 9% to approximately $8.1 billion. Israel has ordered 75 F-35 aircraft to date, and the US approved the sale of F-35s to Saudi Arabia this year, a deal that could boost future orders.

Free cash flow in the second quarter was $2.9 billion, a significant improvement from a negative $150 million in the same period last year, with an updated annual forecast of $7 to $7.2 billion. The company distributed about $1.6 billion in dividends in the first half of the year, with no share repurchases, contrasting with $1.25 billion in buybacks in the first half of the previous year. The market will be closely watching the upcoming earnings report for signs that large orders are translating into sales and if the F-35 delivery rate is recovering.