Lockheed Martin Stock Got Downgraded. Why the Shares Are Rising.

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Lockheed Martin stock bounced Wednesday after a dreadful Tuesday. Despite the higher stock price, Wall Street has some concerns about the defense contractor, and one analyst even downgraded the shares.

Shares gained 2.1% to $419.39 on Wednesday, while the S&P 500 and Dow Jones Industrial Average added 0.8% and 1.1%, respectively.

Shares lost 11% on Tuesday following the company’s second-quarter earnings report. Lockheed surprised investors, recognizing special charges totaling about $1.7 billion. Charges for classified programs in the company’s aeronautics segment totaled $950 million. Two charges for helicopter programs totaled $665 million. Write-offs for the Air Force’s sixth-generation fighter jet, awarded to Boeing , amounted to $66 million.

There is “no assurance that the pain is over,” wrote Vertical Research Partners analyst Rob Stallard on Tuesday. “While Lockheed management detailed a number of reasons for why these charges had been taken in 2Q, they gave little assurance that the related risk is now behind us…Lockheed is unable to say how long the [classified] program still has to run due to its secretive nature.”

Stallard cut his price target on Lockheed stock to $460 from $505, and rates shares at Hold.

Truist analyst Michael Ciarmoli downgraded Lockheed stock to Hold from Buy, and dropped his target price to $440 from $554. Quarterly charges “were far larger and broader in scope than we had expected,” he wrote on Tuesday. “And while this may be a kitchen sink type quarter…future charges across existing programs may materialize in the coming periods as oversight and controls are strengthened and expanded.” It all makes achieving cash flow and profit goals harder.

With the cut, about 36% of analysts covering Lockheed stock have Buy ratings, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $492, down roughly $30 from pre-earnings levels.

The consensus estimate for 2026 earnings per share is down about 50 cents to $29.50. The average price target and earnings estimate values Lockheed stock for about 16.5 times estimated 2026 earnings. That isn’t too far off its historical multiple of close to 17 times.

Investors can read that into the valuation multiple in a couple of ways. Either investors don’t want to pay a historical multiple for Lockheed right now due to uncertainty, or investors expect more earnings cuts.

Either way, investors have some concerns about the company right now.

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