NEW YORK, Jan 7, 2026, 17:02 EST
Lockheed Martin has struck a seven-year framework agreement with the U.S. Department of War to more than triple production capacity of its PAC-3 missile interceptors, a key part of the Patriot air-defense system. Output is expected to rise to about 2,000 a year from roughly 600 as demand for air defenses climbs, and the missiles have also been supplied to Ukraine. The U.S. military awarded Lockheed a record $9.8 billion contract in September for 1,970 Patriot missiles. 1
The deal lands as the department tries to push munitions into a faster, steadier production rhythm, after years of complaint about long lead times and thin stockpiles. Secretary of War Pete Hegseth said the new acquisition model aims to “stabilize demand signals” and award “bigger, longer contracts” so firms invest to expand capacity. 2
Under Secretary Michael Duffey told reporters the framework is meant to fix what he called a misalignment of risk, with contractors putting up the money for expansion instead of the government. “The era of business as usual is over,” Duffey said. Lockheed CEO Jim Taiclet said the goal is 2,000 interceptors a year by the end of 2030 and that the framework includes provisions to reimburse investments if orders change. 3
Lockheed said it has already increased PAC-3 MSE production by more than 60% over the past two years and delivered a record 620 missiles in 2025. The company said the program would add thousands of jobs across the supply chain, and it expects an initial contract award tied to final fiscal 2026 appropriations. “We will create unprecedented capacity for PAC-3 MSE production, delivering at the speed our nation and allies demand,” Taiclet said. 4
Lockheed shares fell 4.8% to $496.87 on Wednesday, after swinging between $496.12 and $532.43. The stock had jumped about 2% in Tuesday trading after the announcement, MarketBeat reported. RTX fell 2.5% and Northrop Grumman slid 5.5% on the day. 5
Goldman Sachs reiterated its Sell rating on Lockheed and kept a $430 price target, well below where the stock traded earlier this week. Goldman pointed to a high relative strength index (RSI) — a trader’s momentum gauge that can flag “overbought” conditions — and said outcome-based contracts and more risk sharing can pressure margins if performance slips. The bank forecast only low single-digit revenue growth over the next five years. 6
The sector also absorbed fresh political risk on Wednesday after President Donald Trump said he would block dividends and share buybacks at defense contractors until they speed up production. In October, Lockheed raised its dividend to $3.45 a share and authorized up to $2 billion in buybacks, lifting total repurchase authorization to $9.1 billion, Reuters reported. Trump did not say how he would enforce the limits. 7
Still, the PAC-3 ramp hinges on Congress approving budgets and on a supply chain that can scale fast enough without pushing costs higher. And the contract terms meant to speed output — tighter delivery accountability and profit sharing — leave less room for delays than many old-style defense programs.
Lockheed is due to publish fourth-quarter and full-year 2025 results before the market opens on Jan. 29 and will host a webcast at 8:30 a.m. ET. Investors will be looking for what the company says about factory spending, margins and the pace of PAC-3 orders under the new framework. 8
