Lockheed Martin (LMT): A Long-Term Investment Memo—Assessing a Defense Infrastructure Company Through “Execution Capability,” Not “Demand”

* This report is based on data as of 2026-01-07.

What the company does—and how it makes money (middle-school version)

Lockheed Martin (LMT), put simply, builds “national security tools”—fighter jets, missiles, satellites, and related systems—for governments, and then supports those systems over long operating lives. Unlike consumer companies that sell smartphones or appliances to individuals, LMT’s core customers are the U.S. government (defense-related) and allied governments.

Who the customers are: driven more by “politics and security” than the economy

• Main customers: the U.S. government (defense) and allied/partner governments
• Characteristic: instead of one-off purchases, relationships often turn into multi-year or even multi-decade procurement and operations engagements
• What matters: “works reliably,” “safe,” and “can protect classified information” often matter more than price
• Key swing factors: tends to be influenced more by budgets, policy, and geopolitics (politics/security) than by the economic cycle

How it earns: ① delivery ② sustainment ③ R&D sold as a “bundle”

LMT’s revenue model has three main legs: (1) long-duration programs to build, test, and deliver fighter aircraft, missiles, and other systems; (2) a post-delivery operations business that generates revenue over long periods through inspections, repairs, parts replacement, upgrades, and software updates; and (3) contracted R&D for next-generation technologies and improvements, which can later feed into production and sustainment work.

Another way to think about it: it’s less like “a company that sells high-performance cars,” and more like “a company that builds a national-scale toolkit for firefighting, policing, and disaster response—and then stays on the hook for keeping it maintained and upgraded so it remains usable.”

Current core businesses: air, missiles, space, and electronics/information

LMT isn’t a one-product story. It’s built around multiple pillars: air, missiles and air defense, space, and electronics/information (integration). The key point is that these businesses are rarely “deliver and done”; they’re designed around long operating lives with ongoing upgrades.

Aeronautics (fighter aircraft, etc.): massive programs plus long-term operations and upgrades

The flagship example is fighter aircraft programs like the F-35, where the value isn’t just building the airframe—it’s also the long-duration operations, maintenance, and upgrade cycle. At the same time, the bigger and more complex the program, the more “execution difficulty” can become the story, including revisions to upgrade plans, delivery delays, and parts shortages.

Missiles and air defense: beyond demand growth, “supply capacity itself” becomes valuable

Interceptor missiles and related systems have become increasingly important in today’s security environment. As a recent update, for the PAC-3 MSE interceptor missile for Patriot, a framework agreement with U.S. defense authorities points to a multi-year push to materially expand production capacity (annual capacity from ~600 to ~2,000). In this category, the market is moving into a phase where “how much you can produce” and “whether you can execute a ramp” can become real competitive advantages.

Space (satellites, etc.): end-to-end “systems” from collection to ground operations

LMT participates in satellites and space-related systems, including ground-side operations. Recently, the U.S. SDA has also been placing distributed orders across multiple companies under fixed-price structures, suggesting space may increasingly resemble a model where distributed procurement and rotation are more likely than a pure “winner-takes-all” outcome.

Electronics and information (sensors, communications, C2, integration): making separate assets operate as “one team”

Sensors, communications, and command mechanisms are what allow separate assets to operate like a single team. As platforms become more networked and software-defined, integration, update velocity, and operational management matter more—making this area increasingly central to LMT’s value proposition.

Future pillars: AI, automation, and integrated software as the foundation of “how to win”

LMT is often viewed as a hardware company, but future competitiveness is likely to hinge on how effectively it can deploy AI, automation, and software integration in mission environments. This is less about near-term revenue swings and more about the long-term question of underlying strength—i.e., how durable barriers to entry are built.

Infrastructure to operate AI safely (AI Factory, etc.): auditability and robustness over convenience

Defense AI comes with strict requirements for auditability (being able to trace what data it learned from and how it reached decisions), as well as resilience and tamper resistance. LMT is not positioning itself as “build AI and walk away,” but instead emphasizes “the ecosystem to operate it safely” (including its collaboration with Google Cloud in that context).

A framework to connect AIs (STAR.OS): productizing the integration layer

In real-world operations, it’s not enough to run a single AI; multiple AIs and systems must work together. LMT has introduced a framework (STAR.OS) aimed at enabling interoperability across different AIs. This is ultimately about whether LMT can control the “integration container,” which could shape the long-term competitive landscape.

Unmanned systems, autonomy, and swarm operations: update velocity becomes value

Unmanned systems are becoming more important not only as remotely piloted platforms, but also for autonomous operation driven by field-level situational awareness. LMT has highlighted initiatives aimed at rapidly updating software on unmanned systems to improve capability, including swarm operations.

Capacity expansion and automation as internal infrastructure: a weapon in a world where you can’t build even if you want to

In defense, shortages of parts, labor, and facilities can make “we can’t build even if we want to” a recurring reality. Investment in capacity, supply-chain strengthening, and automation can therefore translate directly into competitiveness. The PAC-3 MSE ramp framework is a representative example of using demand visibility to support capex.

Long-term fundamentals: using the numbers to understand LMT’s “type” (growth story)

In Peter Lynch’s terms, the key questions are “what type of company is this?” and “is it still behaving like that type?” LMT operates in an industry with meaningful demand, but investors should focus not only on the demand narrative, but also on the direction of earnings power.

Long-term trends in revenue, EPS, and FCF (5-year/10-year)

• EPS growth rate (annualized): 5-year +0.3%/year, 10-year +7.1%/year (solid over 10 years at a single-digit rate, but close to flat over 5 years)
• Revenue growth rate (annualized): 5-year +3.5%/year, 10-year +5.9%/year (up over the medium and long term, but not a high-growth profile)
• FCF growth rate (annualized): 5-year -1.9%/year, 10-year +5.8%/year (up over 10 years, but sluggish over the most recent 5 years)

The fact that the story looks different over 5 years versus 10 years largely reflects the measurement window—recent deceleration weighs more heavily in the 5-year view.

Profitability: long-term perspective on ROE and cash generation (margins)

• ROE (latest FY): 84.26%
• FCF margin (FY 2024): 7.44% (the median over the past 5 years is in the 9% range, and the current level is below that)

ROE is extremely high, but there are years when equity becomes very small, which can mechanically push ROE higher. So it’s safer not to read ROE as “the business suddenly became ultra-profitable,” and instead interpret it alongside cash generation and leverage.

Per-share value: long-term share count trend (implications of buybacks, etc.)

Shares outstanding have declined over time (2014: 322.4 million shares → 2024: 239.2 million shares). Over the long run, that creates a tailwind for per-share metrics like EPS.

One-sentence source of growth: revenue is rising, but near-term profit/EPS are falling

Revenue has grown over the medium and long term, but near-term profit and EPS have fallen—putting LMT in a phase where “revenue growth alone isn’t translating into EPS.” Over the longer arc, the data suggest that both buybacks (share count reduction) and revenue growth have likely supported EPS.

Viewed through Lynch’s six categories: closer to a Stalwart, but a “hybrid” with a deceleration phase

Because LMT’s demand is driven more by national budgets and security priorities than the economic cycle, it has more in common with a “Stalwart.” However, in the latest TTM, profit, EPS, and FCF have decelerated, which pushes it outside the clean definition of a pure Stalwart (stable earnings power). At this point, it’s reasonable to frame it as “Stalwart-leaning, but a hybrid that includes a near-term deceleration phase.”

Short-term momentum: revenue is growing, but EPS and FCF are weak (is the type holding?)

Even for long-term investors, near-term deterioration—TTM or roughly the last eight quarters—matters. The question is whether the long-term “type” is still intact in the short run, or whether the gap is widening.

Current TTM: revenue slightly up, profit and cash sharply down

• EPS (TTM): 18.04, YoY -35.51%
• Revenue (TTM): $73.349 billion, YoY +2.88%
• FCF (TTM): $4.593 billion, YoY -29.41%
• FCF margin (TTM): 6.26%

Bottom line: momentum is Decelerating. Revenue is still growing, but EPS and FCF have fallen sharply—creating clearly “divergent momentum.”

Two-year acceleration: revenue up, profit and cash down

• EPS (TTM) 2-year CAGR: -19.90%/year (strongly downward)
• Revenue (TTM) 2-year CAGR: +4.19%/year (strongly upward)
• Net income (TTM) 2-year CAGR: -22.09%/year (strongly downward)
• FCF (TTM) 2-year CAGR: -14.13%/year (downward)

This two-year window reinforces the broader point: even as revenue rises, near-term earnings power and cash generation aren’t keeping pace.

Where FY and TTM differ: the gap in FCF margin

FCF margin is 6.26% on a TTM basis versus 7.44% in FY 2024. Differences between FY and TTM are simply differences in the measurement window, and the TTM figure may be capturing more of the recent weakness.

Financial health: interest coverage is adequate, but leverage and the cash cushion aren’t “thick”

When momentum is weak, the issue is usually less about immediate bankruptcy risk and more about the erosion of capital allocation flexibility. Here’s a quick read on debt, interest-paying capacity, and the cash cushion.

• Debt load (equity ratio multiple, latest FY): 3.38x
• Net Debt / EBITDA (latest FY): 2.15x
• Interest coverage (latest FY): 7.00x
• Cash ratio (latest FY): 0.13

With interest coverage at 7x, interest-paying capacity does not look immediately impaired. That said, Net Debt / EBITDA is elevated versus the company’s historical levels, and the cash ratio is not easy to describe as high. In a period where profit and cash are weak, it’s hard to argue the company has a “thick financial cushion.” In context, bankruptcy risk isn’t the near-term focal point, but investors will want to see the quality of any recovery—especially a rebound in cash generation—while leverage remains high.

Dividends and capital allocation: LMT is a “dividend-led” name

LMT is a stock where the dividend is a central part of the investment case. It’s not a side benefit; it’s reasonable to treat it as a core pillar of shareholder returns.

Current dividend profile and positioning (vs. its own history)

• Dividend yield (TTM): 2.70%
• Dividend per share (TTM): $13.36
• 5-year average yield: 3.14%, 10-year average yield: 4.01% (currently below the company’s historical averages)

This dataset doesn’t include peer data, so we can’t claim an industry ranking. But versus LMT’s own history, today’s yield sits on the low side.

Dividend growth: dividend growth has been stronger than business growth

• 5-year dividend per share growth: +7.26%/year
• 10-year dividend per share growth: +8.89%/year
• Most recent 1-year dividend increase (TTM): +4.58% (a slower pace than the 5-year and 10-year annualized rates)

Dividend safety: covered, but not a phase with a wide margin of safety

• Payout ratio (earnings basis, TTM): 74.05% (higher than the 5-year average of 48.22% and the 10-year average of 52.89%)
• Payout ratio (FCF basis, TTM): 67.71%
• Dividend coverage by FCF (TTM): 1.48x

On the latest TTM, the dividend is covered by cash flow (coverage is above 1x). However, payout ratios are above historical averages, suggesting this isn’t a period with an unusually large cushion.

Dividend track record: strong long-term record, but there has been a cut in the past

• Consecutive dividend payments: 32 years; consecutive dividend increases: 22 years
• Most recent dividend cut year: 2002

LMT has a well-established record of maintaining and raising dividends, but it’s also a matter of fact that it has not been “never cut.”

Investor fit: relevant for both income and total return, but the “near-term burden” matters

For income investors, a 2.70% yield is meaningful, and the dividend growth history is long. But the latest TTM payout ratios are higher, which reads as “a strong track record, but not a phase with a thick cushion.” For total-return investors, with profit and EPS decelerating, the dividend can look more like a constraint—even though it is not currently exceeding cash flow.

Where valuation stands: only locating “where we are” versus LMT’s own history

Rather than comparing to peers or market averages, this section simply places valuation, profitability, and leverage within LMT’s own distributions over the past 5 years (primary) and 10 years (secondary). The goal isn’t to force a conclusion, but to build a “map” of the current setup.

PEG: negative, making apples-to-apples comparisons to the normal range difficult

• PEG (latest): -0.80

The current PEG is negative, which makes it hard to classify as “in range / breakout / breakdown” against the typical historical distribution where PEG is positive. A straightforward interpretation is that the last two years of declining EPS momentum have pushed the company into a regime where PEG is more likely to be negative.

P/E: above the upper end of the 5-year and 10-year ranges (breakout)

• P/E (TTM): 28.36x

P/E sits clearly above the normal ranges over the past 5 and 10 years, putting it on the expensive side versus LMT’s own history. This also reflects the mechanical effect that P/E can look elevated when TTM earnings have fallen.

Free cash flow yield: below the lower end of the historical range (breakdown)

• FCF yield (TTM): 3.88%

FCF yield is below the lower bound of the normal ranges over the past 5 and 10 years, placing it on the low-yield side versus the company’s own history—i.e., a setup where higher expectations can be more easily priced in.

ROE: mid-range within the historical distribution (but interpret with care)

• ROE (latest FY): 84.26%

ROE sits around the middle of the historical distribution. But as noted earlier, equity can be thin in some years, so it’s prudent not to over-weight ROE by itself.

FCF margin: below the historical range (breakdown)

• FCF margin (TTM): 6.26%

FCF margin is below the normal ranges over the past 5 and 10 years, putting cash-generation quality at a historically weak point.

Net Debt / EBITDA: “high” as an inverse indicator (breakout to near the upper bound)

• Net Debt / EBITDA (latest FY): 2.15x

Net Debt / EBITDA is an inverse indicator: lower (or negative, closer to net cash) generally implies more financial flexibility. The current level is above the 5-year range and near the upper bound even over 10 years, indicating historically elevated leverage for LMT.

The “shape” across six metrics: profitability is in-range, while cash generation and leverage skew toward the challenge side

ROE is in-range, but FCF margin is below range. Valuation shows P/E above range and FCF yield below range—both outside normal ranges. On the balance sheet, Net Debt / EBITDA is above the 5-year range. This isn’t a verdict of good or bad; it’s simply a snapshot of where the numbers sit before comparing them to the narrative in the sections that follow.

Cash flow tendencies: whether EPS and FCF are moving together, and what’s driving it

The recent pattern is clear: revenue is growing, but EPS and FCF are weak. EPS (TTM) is -35.51% YoY and FCF (TTM) is -29.41% YoY, meaning profit and cash are deteriorating at the same time.

From this dataset alone, we can’t pinpoint whether the weakness reflects margin pressure in specific segments, working-capital or process bottlenecks, or a temporary cash-flow profile tied to ramp investments and supply-chain strengthening. But investors should track—separately from “demand strength”—whether the company’s ability to convert revenue and profit into cash (cash conversion efficiency) improves, as a key measure of recovery quality.

Why this company has won (the core of the success story)

LMT’s core value is its ability to consistently support complex national-security systems from procurement (deployment) through long-term operations. Fighter aircraft, missiles, space assets, and C2/sensors require not just standalone performance, but integration, classified handling, certification, continuous updates, and supply accountability as a package—an area where barriers to entry can be powerful.

Top 3 attributes customers tend to value (generalized from structure)

• Reliability and track record: in missions where failure isn’t an option, “it works” is the value
• Integration capability: can optimize across sensors, communications, C2, intercept, and strike as a whole
• Long-term operational support: dependable maintenance, parts, software updates, and training become real switching costs

Demand tailwinds (growth drivers): air defense demand, allies, software updates

• Air defense/intercept demand: demand to defend tends to rise, making interceptor missile ramp-ups a key theme
• Allied demand: once adopted, relationships often become long-lasting
• Weapons that improve via software updates: post-delivery updates create value, and sustainment revenue can deepen

Is the story still intact: are recent moves consistent with the “winning path”?

Over the past 1–2 years, the gap has become more visible: demand appears strong, but realized output—profit and cash—has not kept pace.

• Demand: in interceptor missiles, the conversation has moved from “there is demand” to “increase supply”
• Execution: in complex programs, delays and shortages continue to show up (including revisions to F-35 upgrade plans, delivery delays, and parts shortages)
• Consistency with the numbers: slightly positive TTM revenue alongside sharply weaker EPS and FCF is consistent with “demand exists, but execution, costs, and operational complexity are pressuring profit and cash”

In other words, the core success story (integration, long-term operations, supply accountability) still points in the right direction, but the current setup is closer to “execution difficulty has increased, and investors should wait for a confirmed recovery in earnings power.”

Invisible Fragility: things that look fine now but can hurt later

This section isn’t about something “breaking tomorrow,” but about less visible weaknesses that can build quietly and then show up in the numbers with a lag.

• Concentrated customer dependence (policy risk): with a government-centric customer base, shifts in procurement priorities, contract structures, and oversight intensity can change how profits are earned
• Supply-chain traps during ramp phases: even if a ramp like PAC-3 MSE is directionally right, constraints in parts, labor, facilities, or quality can spill into schedules and costs (the fact that dual-sourcing is being discussed suggests the risk is real)
• Chronic delays in complex programs: the longer delays and shortages persist, the more likely they are to trigger stricter performance metrics and tighter contract terms
• Weak cash generation quietly matters: if cash-generation quality stays below normal while ramp investment and supply-chain strengthening overlap, capital allocation flexibility can shrink
• Thin financial cushion: with leverage metrics elevated versus the company’s history, the setup is less forgiving when profit and cash are weak, and constraints can surface more quickly if investment, ramping, and talent acquisition are pursued simultaneously

Competitive landscape: defense is less “spec competition” and more “regulatory fit × execution”

LMT doesn’t compete in a market where demand is created through advertising and won on price. Government procurement is shaped by rules, certification, classified requirements, and national-security constraints. Large programs run through development → production → operations → upgrades over decades, which makes midstream entry difficult. That said, competition can still intensify through distributed procurement and shifts toward fixed-price structures.

Key competitors: traditional primes plus domain leaders

• RTX: a mix of competition and cooperation in air defense and missile defense (e.g., Patriot next-generation radar LTAMDS moving into production)
• Northrop Grumman: competes in space, missiles, unmanned systems, etc. (space also has a distributed-procurement flavor)
• Boeing (Defense): competes in parts of military aviation (e.g., additional KC-46A contract)
• General Dynamics: not a complete overlap by domain, but can compete within defense budget allocation
• BAE Systems: can compete via U.S. and allied procurement in electronic warfare, ground, naval, etc.
• L3Harris: competes and cooperates in parts of sensors, communications, and space
• Thales / Airbus Defence & Space: can compete in allied markets (especially Europe)

Adjacent players: new entrants that “componentize” and capture peripheral value

• Anduril: growing presence in unmanned, autonomy, counter-drone, etc., suggesting the integrator role could be partially carved out
• Palantir: if data integration and AI infrastructure become standardized, it could capture some of the prime’s peripheral value (analytics and data platforms)

Competitive focal points by domain: missiles are supply accountability, aviation is performance metrics, space is distributed procurement

• Missiles and air defense: beyond performance, “can you ramp production” can become the value (PAC-3 MSE ramp framework)
• Aeronautics: modernization (TR-3/Block 4, etc.), delivery delays, and sustainment (availability) can become competitive battlegrounds through performance metrics
• Space: distributed procurement and fixed-price structures increase replaceability, making the probability of continued awards more important
• Electronics and information: interoperability, adaptation to standardization, and update velocity matter, and the spread of commercial software can reshape the competitive map

What is the moat (barriers to entry), and how durable is it likely to be

LMT’s moat isn’t just “technical secrets.” It’s a bundled advantage that includes certification and classified handling, integration/testing/quality assurance, supply chain and production capacity, and the operational machinery of long-term sustainment (maintenance, upgrades, software updates). The longer the equipment life and the higher the switching costs, the more powerful that bundle becomes.

Importantly, when the moat weakens, it’s often less about “losing on technology” and more about execution: persistent delivery delays, failure to meet sustainment/availability targets, supply shortages (inability to ramp), and changes in economics driven by tighter contracts and oversight.

Structural position in the AI era: tailwinds, but watch for “value-share decomposition”

LMT is evolving away from “a company that builds AI” and toward “a company that operates AI safely in mission environments and integrates multiple systems into outcomes.” In the AI era, forces that strengthen and weaken the business can coexist.

Reasons it could strengthen (structure)

• Network effects: not consumer-facing; as standardization and interoperability expand across allies and multi-domain operations, switching costs can rise
• Data advantage: not advertising data, but the ability to handle operational, maintenance, and manufacturing field data under classified requirements can become valuable
• Degree of AI integration: the center of gravity shifts from individual AI functions to the integration layer that connects multiple AIs (STAR.OS)
• Mission-critical nature: competing in high-assurance AI (strict requirements around malfunction risk, non-explainability, and tamper resistance) can limit viable entrants
• Durability of barriers to entry: even as AI advances, constraints around manufacturing, testing, certification, and continuous supply of physical systems tend to persist

Points that could weaken (structure)

• AI substitution risk: while wholesale replacement of the core (weapons, integrated systems, operational support) appears relatively unlikely, specialist AI vendors may capture value at the edges—analytics, software, and data platforms
• Layer positioning: with foundational layers (general-purpose models) handled via partnerships with large external players, LMT may concentrate on the middle layer (integration, operations, high assurance) plus some applications; however, if it becomes “integration only,” margin pressure could emerge

Management and culture: operational focus is a strength—and also where “slowness” can show up

Based on public information, CEO James Taiclet’s messaging consistently emphasizes delivering required capabilities with speed and scale, adopting commercial approaches where the system allows, and—on AI—focusing less on building models and more on operating safely, integrating, and converting capability into outcomes. The focus on the PAC-3 MSE ramp framework and on investment in facilities, automation, talent, and suppliers aligns with reinforcing LMT’s advantages (supply accountability, integration) while addressing its weaknesses (execution).

Leadership profile and communication characteristics (within public information)

• Operations orientation: emphasizes “can we build it and run it,” often using quantitative, practical framing like production volumes and investment targets
• System design/framework orientation: stresses contract structures and incentive design, and often speaks in a “framework → actions → outcomes” sequence
• Values: ties together mission execution and reliability, delivery and supply certainty, and value to taxpayers and shareholders

What tends to happen culturally: integration is respected, and decision-making can become cautious

• Execution focus: ramping is less about design and more about coordinating manufacturing, quality, testing, materials, and people—so operational excellence on the ground tends to be valued
• Respect for integration: cross-functional coordination, process discipline, and certification are emphasized; as a side effect, decision-making can become cautious (and can be perceived as slow)
• Investment allocation: decisions often tilt toward facilities, automation, talent, and supplier investment
• AI adoption: tends to favor operational deployment that includes operations, audit, and maintenance, rather than PoC

Generalized patterns that tend to appear in employee reviews (no direct quotes)

• Positive: strong mission orientation and social significance / clear role division / confidence from an emphasis on quality and procedures
• Negative: heavy procedures, approvals, and compliance can slow execution / work-style variability across departments and programs / during reorganizations and cost-optimization phases, psychological safety can be more easily disrupted

Fit with long-term investors: strong long-duration themes, but capital allocation tension is a key watch item

The ability to justify investment (facilities, people, suppliers) around supply accountability in an industry with long-lived demand fits a long-term investor mindset. At the same time, with profit and cash momentum currently weak and ramp investment potentially required, this is a period where “funding investment while sustaining shareholder returns” draws more scrutiny—especially for a company with a strong commitment to the dividend. Separately, the CFO has been replaced by an internal veteran, which can be viewed as a continuity-oriented change rather than a signal of abrupt shifts, but it can still affect capital allocation messaging.

Consistency check on the “type”: you want to call it a Stalwart, but near-term results look less consistent

Over the long run, LMT has Stalwart-like characteristics. But when you test whether that “type” is holding in the latest TTM results, revenue stability looks broadly consistent while earnings power (EPS/FCF) looks less consistent.

• Consistent: revenue growth (TTM +2.88%) suggests the business scale hasn’t broken down
• Partly consistent: ROE (latest FY 84.26%) points to a directionally profitable business (but interpret with care)
• Skews inconsistent: EPS growth (TTM -35.51%) and FCF growth (TTM -29.41%) weaken the case for stable growth
• Skews inconsistent: P/E (TTM 28.36x) is above the company’s historical range and is hard to reconcile alongside an earnings-decline phase

Overall, this matches the long-term framing of “Stalwart-leaning plus a hybrid that includes a deceleration phase,” but looking only at the most recent year makes it difficult to classify LMT as a pure Stalwart.

Two-minute Drill: the “investment thesis skeleton” long-term investors should keep

The heart of the long-term LMT debate isn’t “defense demand is strong.” It’s whether execution—running complex systems from deployment through long-term operations—ultimately shows up again in profit and cash. The stronger demand gets, the harder ramping, supply chains, quality assurance, and delivery management become, and the gap can widen between a strong narrative and weak numbers.

• Core strength: “defense infrastructure” capability that bundles certification, classified handling, integration, supply, and long-term operations
• Quality of tailwinds: AI is less a magical new revenue source and more about whether it improves execution across manufacturing, maintenance, and operations
• Current issue: whether execution improvements can close the gap where EPS/FCF are weak even as revenue grows
• Capital allocation tension: sustaining ramp investment/supply-chain strengthening while maintaining a dividend-led return posture

Execution KPIs investors may want to monitor (not the stock price, but “on-the-ground variables”)

• Missiles (PAC-3 MSE, etc.): whether production and delivery pace increases as planned, and whether dual-sourcing of key components advances
• Aeronautics (centered on F-35): whether modernization milestones (TR-3/Block 4) are met, delivery delays narrow, and parts shortages ease
• Sustainment: how improvements in readiness/availability are treated as performance metrics (whether friction increases or decreases)
• Space: whether it stays on the award-winning side under distributed procurement, and whether it can match short-cycle refresh with development/manufacturing tempo
• Electronics and information/AI: how far commercial software standardization progresses, and whether pressure increases to externalize peripheral value
• Financials and dividends: whether profit and cash recovery can coexist cleanly with dividend continuity (including a higher payout ratio)