Summary 1 - Lockheed Martin Corporation reaches agreement with the Pentagon for the procurement of 850 F-35 fighter jets, raising its annual performance forecast.

Rewrite to focus on the fighter jet deal, supplemented with stock price information and paragraphs 1 to 6.

Mike Stone/Aatreyee Dasgupta

Reuters, October 22 - Lockheed Martin Corporation (LMT.N) reached an agreement on Thursday to sell at least 850 F-35 Lightning II stealth fighters to the Pentagon over the next 10 years, with a potential deal value of at least $78 billion.

Lockheed’s shares surged as much as 10%, on track for the largest gain in three months. As geopolitical conflicts fuel higher demand for its systems, the U.S. defense contractor raised its annual sales and profit outlooks, surpassing Wall Street expectations.

The company regards this jet as the most advanced in the world, using stealth technology to evade enemy detection. It is at the core of Lockheed’s aviation segment, which contributes nearly 40% of the company’s quarterly revenue.

Under the agreement, Lockheed will strive to maintain an annual production of 156 jets for both U.S. and international customers and will independently raise at least $7 billion to support various F-35 program initiatives.

Although the deal does not constitute a sales order, Lockheed views it as a pre-arranged long-term contract.

$78 Billion Deal

The least expensive variant of the fighter jet sells for $92 million, so the 10-year framework agreement (link) is expected to be worth at least $78.2 billion. The F-35B short takeoff/vertical landing variant, used by the Marine Corps, is priced at $121 million, while the Navy’s F-35C sells for $110 million. The proportion of each model in the contract remains unclear, and prices are expected to rise due to inflation and increasing labor costs.

Lockheed also supplies missile defense systems such as the Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD). This week, together with RTX (RTX.N) and Northrop Grumman (NOC.N), (link) the company raised its performance outlook amid strong demand for munitions, air defense systems, and military aircraft.

Lockheed forecasts 2026 sales to be about $80 billion to $82 billion, up from its previous outlook of $79.75 billion to $81.75 billion.

The company also raised its annual earnings per share outlook to $30.35 to $30.75, up from $29.95 to $30.65.

Thanks to a $52.5 billion multiyear contract for the PAC-3 Missile Segment Enhancement interceptors—which saw heavy use by U.S. and allied forces during the Iran conflict—the company’s backlog rose 27% sequentially to a record $292 billion.

Lockheed raised its 2026 free cash flow forecast from the previous $7 billion to $7.2 billion to about $7.8 billion to $8 billion.

Sales rose 11% to $20.71 billion for the quarter ending September 27, mainly due to a 24% increase in the missiles division (driven by higher PAC-3 and THAAD output) as well as a 13% increase in aviation revenue from the F-35 and C-130 programs.

According to data compiled by London Stock Exchange Group (LSEG), analysts previously expected this figure to reach $20.51 billion.

Chief Financial Officer Evan Scott told Reuters that the higher capital expenditure in the fourth quarter was mainly due to investments to expand munitions production capacity.

Third-quarter earnings per share were $7.97, higher than analysts’ expectation of $7.43 per share.

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