Investing.com -- Lockheed Martin is poised for stronger and more durable earnings growth than investors currently expect, with rising missile demand, F-35 sustainment and other defense programs supporting a multi-year expansion, UBS said on Tuesday as it upgraded the defense contractor to Buy from Neutral.

UBS raised its 12-month price target to $674 from $581, implying about 26% upside from the report's Sept. 4 share price of $524.48. The bank expects the company to deliver a 9% revenue compound annual growth rate through 2028, above consensus, and sees double-digit earnings-per-share upside to consensus by 2028.

The main growth engine is Lockheed's Missiles and Fire Control (MFC) business, where UBS expects production of PAC-3, THAAD, PrSM and JASSM/LRASM missiles to accelerate sharply. The bank forecasts MFC revenue rising from $14.5 billion in 2025 to $35.7 billion by 2030, representing more than 20% annual growth over the period.

Large multiyear awards are giving Lockheed greater visibility into future production. UBS highlighted a $35 billion THAAD award and a nearly $60 billion PAC-3 framework agreement, while noting that Lockheed's book-to-bill ratio reached 3.2 times in the latest quarter, compared with 1.2 times in 2025.

The bank argues that the missile buildup is more than a temporary defense-spending cycle. Recent conflicts have depleted inventories of advanced interceptors, while governments are reassessing stockpile requirements and increasing spending on missile defense and precision strike systems. UBS estimates production of key missile platforms could be roughly four times higher in 2035 than in 2025.

The F-35 program provides another source of recurring growth. Although aircraft production is expected to remain broadly stable, UBS forecasts sustainment revenue to rise from $5.1 billion in 2025 to $8.8 billion in 2030, helped by a growing global fleet and increased spending to improve aircraft readiness.

Other programs, including CH-53K helicopters and Trident fleet ballistic missiles, should further diversify growth. UBS expects Trident's budget to rise to a proposed $5.2 billion in fiscal 2027, while CH-53K funding could reach $4.1 billion.

UBS also sees a significant improvement in cash generation despite elevated investment. Capital expenditure is expected to rise to 3.2% of revenue in 2027, its highest level in more than a decade, as Lockheed expands missile production capacity. After a pension-related drag in 2027, the bank expects free cash flow to accelerate alongside EBITDA growth, with free cash flow per share rising about 50% by 2030.

UBS forecasts Lockheed's revenue to rise from $75.0 billion in 2025 to $81.0 billion in 2026, $88.5 billion in 2027 and $96.1 billion in 2028, while adjusted EPS is expected to increase from $21.48 in 2025 to $30.69 in 2026, $34.50 in 2027 and $39.34 in 2028.