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Investing.com -- Truist downgraded Lockheed Martin (NYSE:LMT) to Hold from Buy and cut its price target for the stock to $440 from $554 in a note to clients on Wednesday.
The firm pointed to broad and unexpected charges that cast doubt on the company’s long-term growth outlook.
“The charges of $1.8B that materialized in the quarter were far larger and broader in scope than we had expected,” Truist analysts wrote. “We believe future charges across existing programs may materialize in the coming periods as oversight and controls are strengthened and expanded.”
Truist expressed concern over Lockheed’s ability to deliver on its multi-year growth plan, saying it now has “little confidence that management will be able to execute” and cannot rule out further charges.
The firm cut its free cash flow estimate for 2026 by 11% and warned the stock is likely to trade flat for the rest of the year due to “a lack of catalysts.”
Lockheed took multiple charges in the quarter across its Aeronautics and Rotary and Mission Systems (RMS) divisions.
These included a $950 million pre-tax loss tied to a classified Skunk Works program facing “design, integration, test challenges and performance issues,” and a $570 million charge from the Canadian Maritime Helicopter Program.
A further $95 million was booked for the Turkish Utility Helicopter Program, and $66 million in write-offs were linked to the U.S. Air Force’s Next (LON:NXT) Generation Air Dominance decision.
Truist also flagged a “tax overhang of $4.6B” due to a dispute with the IRS. Lockheed has taken a $100 million P&L accrual but “fundamentally disagrees with the grounds for the claim” and is prepared to pursue legal action.