Al Root

The holidays are the season of year-ahead outlooks on Wall Street. Investors in aerospace and defense have two to consider on Friday.

J.P. Morgan downgraded Lockheed Martin stock, and KeyBanc offered a slate of shares to buy.

Analyst Seth Seifman lowered J.P. Morgan's call on Lockheed stock to Hold from Buy, though he raised his target for the stock price to $515 from $465. near where the shares were trading on Friday.

"Lockheed Martin has underperformed this year, and perhaps we'll regret not sticking with a less popular call for longer, but with our out-year cash flow estimates below consensus, we are moving to the sidelines," wrote Seifman. Lockheed's "Missiles and Fire Control business...which is about 20% of the portfolio, will likely grow quickly for several years, but other parts of the portfolio face top-line challenges.... One thing we worry about less is F-35 production, which we see remaining at 156" jets per year.

The F-35 fighter jet always looms large for Lockheed, accounting for about 25% of total revenue.

Lockheed stock was down 0.4% in early trading at $468.33, while the S&P 500 and Dow Jones Industrial Average were both up 0.5%. Coming into Friday trading, shares were down 3% year to date.

That drop came despite a strong performance for the sector. The iShares Aerospace & Defense ETF was up 44% year to date, boosted by higher commercial-jet production and rising military spending in the U.S. and Europe.

The outlook for aerospace remains solid, Seifman wrote, adding that defense has positive factors as well. The outlook for defense is a little trickier because governments are focused more on small drones and missiles than on large programs.

That view aligns with KeyBanc analyst Michael Leshock, who launched coverage of several space and defense stocks on Thursday.

He rates shares of drone and rocket-technology companies AeroVironment, Karman, and Kratos Defense & Security Solutions as Buy. His AeroVironment target is $285, while his call on Karman is $80. His Kratos target is $90. All have "strong leverage" to "secular" growth drivers, Leshock wrote.

AeroVironment's stock was up 2.7% at $236.88 in early trading. Karman stock was up 1.4% at $69.04. Kratos stock was up 2.8% at $73.38.

All of the analysts who cover AeroVironment and Karman rate them at Buy, while the Buy-rating ratio for Kratos stock is 83%. That support has led to strong performance and big valuations.

Coming into Friday trading, AeroVironment stock was up 50% year to date, leaving shares trading for 54 times the per-share earnings expected over the coming 12 months. Kratos' stock was up 171%, leaving shares trading for 93 times earnings.

Karman completed its an initial public offering in February at $22 a share. At about $68, shares trade for about 123 times the earnings expected over the coming 12 months.

Only 32% of analysts covering Lockheed stock rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

Write to Al Root at allen.root@dowjones.com

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December 19, 2025 09:46 ET (14:46 GMT)

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