UBS upgraded Lockheed Martin (LMT) to Buy from Neutral on Tuesday, raising its price target to $674 from $581. Shares were trading near $525 when the upgrade was issued.

UBS analyst Gavin Parsons laid out a bullish thesis built on ramping missile production, expanding defense budgets, and revenue diversification beyond the F-35 fighter jet. The firm projects roughly 9% compound annual revenue growth through 2028.

Missile and Fire Control at the Core

The missile and fire control segment anchors the outlook. UBS expects the unit to deliver 150% revenue growth between 2025 and 2030, with production volumes across four principal missile platforms expanding more than 30% annually before moderating to a sustained, slower pace.

Key programs driving this growth include the PAC-3 interceptor system, Terminal High Altitude Area Defense (THAAD), the Precision Strike Missile, and JASSM/LRASM weaponry. Lockheed has secured framework contracts worth approximately $35 billion for THAAD systems and $59 billion for PAC-3 production.

The demand surge reflects depleted Western munitions stockpiles, higher inventory requirements, and rising international defense spending. UBS describes the expansion as a fundamental market shift rather than a temporary spike. That shift has concrete policy underpinnings: NATO members have been moving toward higher defense-spending commitments, and several European governments have announced multiyear increases in military procurement, while the U.S. defense budget request has grown in recent years — trends that support sustained order flow for prime contractors like Lockheed. How these budget commitments translate into actual appropriations and contract timing remains a key variable for the outlook.

Additional Growth Drivers

The investment case extends beyond missiles. UBS flagged F-35 support services, the CH-53K heavy transport helicopter, and the Trident submarine-launched ballistic missile program as underestimated growth drivers.

The F-35 program accounted for roughly 27% of Lockheed's 2025 total revenue. While aircraft manufacturing growth is expected to advance gradually, UBS projects faster expansion in maintenance and technical support as the global fleet grows and requires increased servicing. That concentration also cuts both ways: F-35 deliveries have faced periodic schedule and quality issues in recent years, so the shift toward services revenue is a notable diversification angle within the program itself.

Financial Projections

UBS forecasts revenue of $81.05 billion in 2026, $88.48 billion in 2027, and $96.13 billion in 2028 — the 2028 figure sits about 6% above Wall Street consensus.

On profitability, UBS projects adjusted earnings per share of $30.69 in 2026, $34.50 in 2027, and $39.34 in 2028, with the final figure 12% above consensus estimates.

Free cash flow may face temporary compression in 2027 due to pension funding obligations, but UBS expects a strong recovery, rising from $6.9 billion in 2025 to roughly $9.6 billion by 2030.

The firm values LMT at approximately 11.8 times forward-12-month EV/EBITDA, a 15% discount to the S&P 500 that UBS considers unjustified given the growth trajectory. Under an optimistic scenario, UBS sees the stock reaching $870; the bearish case implies a floor of $452.

Recent Contract Awards

Recent awards reinforce the growth narrative. The Pentagon issued Lockheed a $90.2 million modification for the Trident II Life Extension program, three Navy contracts totaling $41.8 million, and a $49 million agreement for Target Sight System maintenance services. A seven-year framework agreement with the U.S. Department of War focuses on increased production of THAAD and PAC-3 Missile Segment Enhancement interceptors.

Lockheed Martin closed at $524.48 on September 4.