Morgan Stanley has a tough message on Lockheed Martin shares

Morgan Stanley has a tough message on Lockheed Martin shares
Morgan Stanley has a tough message on Lockheed Martin shares

Morgan Stanley reiterated its Equalweight rating and $675 price target on Lockheed Martin (LMT) following the company’s announcement of a new framework agreement with the War Department to quadruple production of the precision strike missile.

LMT shares were trading at $621.73 at the time of the note, up 27% over the past six months. The $675 target implies approximately 8.5% upside from that level. Morgan Stanley described the deal as consistent and complementary to Lockheed’s broader munitions acceleration strategy.

Lockheed Martin and the Department of Defense announced the agreement on March 25. It builds on a previous $4.94 billion contract awarded by the US military last year and together the two actions will quadruple PrSM’s production capacity, from approximately 400 to 1,600 units per year.

The agreement also establishes the possibility of negotiating a multi-year contract of up to seven years, subject to authorization by Congress. That structure gives Lockheed and its subcontractors the long-term demand signal needed to invest in factory expansion and automation.

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“Lockheed Martin delivers the advanced precision-fire capabilities the warfighter needs, including the precision strike missile, which expands deep strike capability,” said Lockheed Martin Chairman, President and CEO Jim Taiclet. “We are working closely with the War Department and the US military to build the Freedom Arsenal.”

Michael Duffey, undersecretary of Defense for acquisition and sustainment, added: “By allowing industry to invest in factories, we are building a decisive and lasting advantage for our warfighters to outperform any potential adversary.”

Morgan Stanley noted that the PrSM deal is part of a broader pattern of multi-year agreements between the Pentagon and Lockheed that are changing the funding environment for the company’s missile programs.

The company had previously noted similar deals: a separate framework to triple production of MSE PAC-3 interceptors and another to quadruple production capacity of THAAD interceptors. Taken together, Morgan Stanley said these deals indicate “structurally greater” demand for War Department missile systems, while improving annual funding and production visibility.

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The bank sees two specific benefits for Lockheed in this environment. First, greater financing certainty allows the company to invest in facilities, supply chains and workforce without the risk of sudden budget cuts. Second, higher production rates create the potential for margin expansion as fixed costs are spread over higher volumes.

The agreement schedule reflects a specific operational context:

  • Debut in combat. On March 4, US Central Command confirmed the PrSM’s combat debut during Operation Epic Fury, the US-Israel campaign targeting Iran’s military infrastructure.

  • Stock pressure. Morgan Stanley explicitly pointed to “growing concerns about pressure on US stockpiles as a result of the ongoing conflict with Iran” as a factor reinforcing the urgency in both replenishment and capacity expansion.

  • ATACMS replacement. PrSM is designed to succeed the Army’s Tactical Missile System with expanded range, improved lethality and greater platform versatility. Quadrupling production directly addresses the void left by the system it replaces.

The agreement is not an isolated case. DefenseScoop reported that the Pentagon simultaneously announced agreements with BAE Systems on the production of THAAD seekers and with Honeywell, which committed $500 million of internal investment for munitions components, including navigation systems, actuators and electronic warfare solutions.

Morgan Stanley’s Equalweight rating means that the firm does not consider LMT to be materially undervalued at current levels relative to its peers. The $675 target reflects the bank’s view that the stock is fairly priced given visible earnings drivers, but that the structural improvement in Pentagon demand is real and lasting. For investors who already own LMT, the note reinforces the thesis. For those considering getting in, Morgan Stanley’s message is essentially that the stock isn’t cheap, but the multi-year earnings visibility of these munitions deals is genuinely improving.

Lockheed noted that it has invested $7 billion since President Trump’s first term to expand production capacity for key systems, including approximately $2 billion focused on munitions production. The company currently has more than 115,000 square feet of manufacturing space dedicated to PrSM in the U.S. and more than 400 employees supporting the program, with plans to further expand the workforce to meet demand.

Related: Morgan Stanley Resets Defense Stock Bets Amid War

This story was originally published by TheStreet on March 29, 2026, where it first appeared in the Investments section. Add TheStreet as a preferred source by clicking here.

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