Lockheed Martin vs RTX vs General Dynamics

The Battle

Welcome back to Battle Stocks, where we put companies in the same sector side by side and let the numbers settle the argument. This week the ring holds the three largest pure American defense primes by market value: Lockheed Martin, RTX, and General Dynamics. We covered the sector as a group in Defense Stocks After the Peace Dividend That Never Came. That piece argued the rearmament cycle was real and durable. This one asks the harder question: if you are going to own a prime here, which one, and at what price?

The timing is loaded. The 2026 Iran war began on February 28, the United States imposed a naval blockade on Iran on April 13, and as of late May the two sides have reached a tentative 14-point ceasefire memorandum that neither leader has fully signed. We have been tracking the maritime side of this in the Hormuz Watch series. The conflict is the single biggest reason these stocks are in every headline right now. It may also be winding down. Both of those facts matter for what follows.

A note on what these three companies actually are, because the word defense flattens real differences. Lockheed Martin is the closest thing to a pure defense prime, built around the F-35, missiles, and space. RTX is a hybrid: roughly 60% of its record backlog is commercial aerospace through Pratt & Whitney engines and Collins avionics, with Raytheon supplying the missiles. General Dynamics is the most diversified of all, pairing Navy submarines and Army combat vehicles with Gulfstream business jets. Same sector label, three different machines.

The Tale of the Tape

Start with the most recent reported quarter, the first quarter of 2026, because it is where the three stories visibly diverge.

One quarter does not decide a thesis, but the pattern is hard to miss. Two of these companies are accelerating and telling investors to expect more. One is treading water and asking for patience. That is the frame for everything that follows.

The Case for Lockheed Martin

Lockheed is the incumbent, and the bull case starts with the single largest program win in the budget. The Pentagon's FY2027 request envisions nearly doubling F-35 production, from 47 aircraft in 2026 to 85 in 2027. At Lockheed's per-unit economics that is on the order of $15.4 billion of incremental program value. Add a Missiles and Fire Control segment that booked roughly $7 billion of Patriot interceptor orders in a single quarter, including a $4.7 billion undefinitized contract for accelerated production, and the demand signal is not the problem.

The price is the draw. After falling from an all-time high near $692 to around $530, Lockheed trades at roughly 26 times trailing earnings but only about 18 times the midpoint of its own full-year EPS guidance of $29.35 to $30.25. It carries the highest dividend yield of the three at about 2.6%, and management reaffirmed free cash flow guidance of $6.5 to $6.8 billion despite the ugly Q1 cash number, which it attributed to billing timing rather than lost demand.

Here is the honest counterweight, presented up front because that is what this brand does. The flat revenue is not new, the negative free cash flow is real, and the backlog actually shrank during the quarter. Cumulative losses on Lockheed's fixed-price and classified programs now exceed $4 billion, a recurring drag that has nothing to do with the budget headline. The entire Lockheed thesis rests on the maintained guidance being credible. If the second half does not deliver the promised cash snapback, this stops being a value play and becomes a value trap.

The Case for RTX

RTX has the best momentum of the three, and it comes from an underappreciated place. The popular story is missiles: Raytheon builds the AMRAAM, Tomahawk, Standard Missile, and Patriot interceptors that the Iran conflict has consumed, with munitions output up more than 40% year over year and Raytheon segment margins reaching 12.2%. That is true and it is bullish. But it is not the whole engine.

The larger driver is commercial aerospace. Of RTX's record $271 billion backlog, $162 billion is commercial, sitting in Pratt & Whitney engines and Collins avionics. Commercial aftermarket sales grew 14% in the quarter, and aftermarket is the highest-margin, most recurring revenue in all of aerospace. RTX raised full-year adjusted EPS guidance to $6.70 to $6.90 and lifted sales expectations to $92.5 to $93.5 billion. It grew organic sales and profit double digits with only a 1% increase in headcount, which is the signature of real operating leverage.

The catch is what you pay for it and what the platform thinks of the business underneath. On trailing GAAP earnings RTX is the most expensive of the three at roughly 32 times, inflated by acquisition accounting, though it falls to about 26 times on forward adjusted EPS. The dividend yield is the lowest at around 1.4%. And the commercial exposure that powers the upside is the same exposure that gets hit first in any travel downturn or, as discussed in our look at the SpaceX S-1, in any repricing of legacy aerospace. RTX is the best growth story here. It is not the cheapest, and it is not the safest.

The Case for General Dynamics

General Dynamics is the most balanced of the three, and balance is the whole point. Revenue grew 10.3%, EPS grew 12%, and the backlog jumped 48% year over year on a 2-to-1 book-to-bill. That growth came from genuinely different places, which is exactly what you want when the macro picture is uncertain.

Marine Systems is the durable core. Revenue there rose 21%, led by the Columbia and Virginia class submarine programs, and the FY2027 budget earmarks $65.8 billion for naval shipbuilding covering 18 battle force ships and 16 support vessels. General Dynamics' Electric Boat is the prime submarine builder, with Columbia running at one boat per year and Virginia ramping toward two per year by 2028. The combined submarine backlog exceeds $40 billion. This is the least narrative-dependent revenue in the entire comparison. A submarine ordered today gets built whether or not there is a war in the Gulf, because it is a 30-year deterrence asset, not a consumable.

Then there is Gulfstream. Aerospace generated $3.3 billion in revenue at a 15% operating margin, with a record 38 jet deliveries. This is the piece that lets General Dynamics win in war or peace. When the geopolitical premium fades, the other two primes lose their loudest catalyst. General Dynamics still has a high-margin business jet franchise and a submarine pipeline that runs for decades. It is the cheapest of the three on trailing earnings at about 22 times, and it pays roughly 1.7%. The honest caveat: Gulfstream is discretionary and cyclical, management has flagged a possible minor hit to G280 deliveries if the Middle East conflict drags on, and Marine Systems still wrestles with supply chain constraints on complex, single-source components.

What Actually Separates Them

Every defense prime sounds like it has an unassailable moat. The programs are decades long, the switching costs are enormous, and the customer is the US government. But the three moats are not equal, and the differences are what decide this battle.

Lockheed's moat is concentration. The F-35 is the largest weapons program in history, which is a strength and a dependency in the same breath. When one program is that large a share of the business, a production adjustment or a fixed-price loss on that program moves the whole company. The moat is deep but narrow.

RTX's moat is breadth, but it is split across two very different worlds. The defense side is a classic prime. The commercial side competes in a global duopoly of jet engines and a concentrated avionics market, where the installed base creates decades of aftermarket revenue. The result is a wide moat that is also more exposed to the commercial cycle than a pure defense name.

General Dynamics' moat is the hardest to attack. Submarine construction is effectively a two-supplier industry in the United States, the skilled workforce takes years to build, and the programs are funded across administrations because they are tied to nuclear deterrence rather than any single conflict. Layer on a business jet brand that buyers choose for reasons of prestige and service, and you get a company whose revenue base is unusually insulated from the one variable that dominates the others: the Middle East.

What the Wealth Engine Scores Say

Before we get to the valuation verdict, here is what the Wealth Engine Pro platform's systematic scoring shows for all three stocks right now. The order matches the Tale of the Tape above.

The scores broadly agree with the editorial read of who is strongest. General Dynamics carries the highest Company Strength of the group at 60, the best Financial Health at 66, and the smallest premium to fair value. RTX sits in the middle, held back by a surprisingly low Moat score of 4 out of 15 that reflects how much of its business lives in the competitive commercial market. Lockheed is the only one flagged as Weak, with a Growth score of just 4.5 out of 15. But notice the common thread: all three are priced above the platform's calculated fair value, and all three carry a Neutral outlook. The systematic data does not see a bargain anywhere in this sector.

These scores are systematic. They evaluate companies based on reported financials, balance sheet quality, moat characteristics, and valuation models including discounted cash flow, peer comparison, and earnings power. They measure what a company is today, not what it might become. That is by design, because the scoring is built to keep emotion and forward speculation out of the numbers.

This article is doing something different. It is making an editorial argument about catalysts that are funded in a budget request but not yet reflected in delivered revenue: a doubled F-35 line, a submarine ramp, a munitions restock. The scoring system has no way to price those in until the orders convert to earnings in the filings. Both perspectives are real data. The platform tells you the current fundamentals do not justify today's prices. The article argues one of these companies is built to compound through whatever comes next. Research any of them yourself on the platform and decide which signal matters more for your situation.

The Valuation Verdict

Put the three valuations next to each other and the picture clarifies. Lockheed looks cheapest on forward earnings, at roughly 18 times guidance, but only if you trust guidance that the most recent quarter did not support. RTX is the most expensive on almost every trailing metric, with the upside resting on a commercial recovery that is real but cyclical. General Dynamics sits in the middle on forward multiples, cheapest on trailing earnings at about 22 times, and carries the smallest gap to the platform's fair value at roughly 22% versus 31% and 32% for the other two.

That last number is the one that matters most for this verdict. The cheapest stock in absolute terms is not necessarily the best value. The best value is the company whose quality and durability justify the smallest leap of faith. On that test, General Dynamics is paying the least for the strongest underlying business. It is still not cheap. None of them are.

What Could Go Wrong

A Battle Stocks verdict is worthless without the case against it, so here is the steelman on both sides.

The case against the whole group

The biggest risk is the one the headlines are creating right now: peace. As of late May the United States and Iran have reached a tentative 14-point ceasefire memorandum. If it holds, the geopolitical premium baked into all three stocks deflates. Defense analysts have noted that munitions demand in particular tends to fade once a conflict neutralizes the adversary. And here is the detail the rearmament narrative glosses over: the Center for Strategic and International Studies estimates that budget dollars appropriated now are roughly 52 months, more than four years, from becoming delivered missiles, once you account for congressional appropriation and manufacturing lead times. The $1.5 trillion request is also just that, a request. Investors remain skeptical Congress passes the full number, which raises the uncomfortable question of whether this is as good as the sentiment gets. Defense stocks have, notably, underperformed expectations during the conflict rather than melting up.

The case against picking General Dynamics

If you believe the conflict escalates and persists, the verdict arguably flips. RTX is the most direct beneficiary of a sustained shooting war, because missiles are consumables and the United States has already expended more than half its prewar inventory of several key munitions including Tomahawks. Lockheed offers the most torque to the budget headline through the F-35 and the deepest discount to its own history. General Dynamics' Gulfstream exposure, the very thing that diversifies it, is also a discretionary, cyclical business that could weaken in a downturn, and a future SpaceX listing could pressure how the market values legacy aerospace broadly. Choosing General Dynamics is a choice for quality and durability over maximum exposure to any single outcome.

The Data Picks a Winner

Among the three, the data points to General Dynamics. It posted the strongest growth, carries the highest Company Strength and Financial Health scores on the platform, trades at the lowest trailing multiple, and sits closest to fair value. Most important, it is the only one of the three built to win regardless of how the Iran conflict resolves. Submarines get built in war or peace. A Gulfstream franchise keeps earning when the missile headlines fade. Lockheed and RTX are both leveraged, in opposite ways, to a geopolitical story that is actively being negotiated toward an end. General Dynamics is not.

But picking a winner among three is not the same as saying buy it today. This is where the editorial verdict and the platform agree. General Dynamics is the best of the three, and it is still trading about 22% above the fair value our models calculate. The honest position is that the business deserves a place on a watchlist and the price does not yet deserve a purchase. The ceasefire negotiations, a Gulfstream-sensitive macro picture, and a budget that is years from hitting earnings all argue for patience. A pullback toward fair value would turn the best company in this battle into the best opportunity. Right now it is only the former.

This is the discipline that defines Wealth Engine Pro. The narrative says there is a war, so own defense. The data says one of these three is genuinely stronger than the others, and that even the winner is priced for a story that may already be ending. We are comfortable naming a winner. We are equally comfortable saying we would wait to pay for it. Separating the quality of a business from the price of its stock is the entire job, and it is the one thing the headlines never do for you.