The "Fury" UAV. The future of Lockheed Martin? Photo: Lockheed Martin

Already up an astounding 85 percentage points over the past year, Lockheed Martin (LMT 0.73%) added to its gains on Friday, closing the day up close to a full percentage point.

For this, you can probably thank an optimistic article run by Reuters earlier in the day, which argued that "the Pentagon's No. 1 arms supplier" will soon begin benefiting from "significant growth potential for its range of unmanned aircraft."

That sure sounds like good news for Lockheed Martin. It sounds like a great reason to buy the stock, and a reason to bid up the stock price. Problem is -- it's all just bunk.

Lockheed Martin: Great potential, underwhelming execution
To hear Reuters tell it, Lockheed Martin has everything it needs to take over the "drone" aircraft space, and steal pole position from current market leaders General Atomics (which builds the ubiquitous Predator drone) and Northrop Grumman (NOC 0.05%), maker of the Global Hawk and Fire Scout. Among other assets, Reuters notes that Lockheed's drone portfolio includes:

  • The RQ-170 "Sentinel" unmanned aerial vehicle, or UAV.
  • The 6-ton robotic "K-MAX" cargo helicopter.
  • A 400-pound, rail-launched drone called the "Fury."
  • A 5-pound small quadcopter UAV called "Indago."

Lockheed's Indago quadcopter. Photo: Lockheed Martin.

Problem is, with the exception of the RQ-170 -- best known for its infamous flubbed landing in the middle of Iran in 2011 -- you probably haven't heard of any of these Lockheed Martin drones -- because, as far as we can tell, no one is buying them.

The large UAV space, where the Sentinel flies, is utterly dominated by drones from Northrop Grumman and General Atomics. In medium-sized UAVs, it's Textron's (TXT 0.65%) Shadow and Boeing's (BA -0.87%) ScanEagle the military is buying. Perhaps most humbling of all, in small UAVs, Lockheed Martin has been completely outmaneuvered by tiny rival AeroVironment (AVAV -1.19%) -- to the extent that, in an effort to get at least some traction in this business, earlier this month Lockheed announced it was going to team up with AeroVironment!

Hope springs eternal
Don't get me wrong. In as novel and fast-moving a space as the market for unmanned aerial vehicles, winners and losers can change places in a heartbeat. The recognized leader in manned fighter jets already, Lockheed Martin certainly has the potential to upset the table and steal market share from its rivals at some point in the future. (Indeed, from what we hear, Lockheed Martin may be trying to do just that with a new secret project operating out of Area 51.)

But for the time being, this is all just hypothetical. Reuters notes that Lockheed "could" win contracts to use its robotic K-MAX to fight forest fires. It "could" win sales for its larger drones from the Department of Homeland Security. It could even begin selling drones "to countries in the Middle East, Europe, and Asia."

"Woulda, coulda, shoulda," though, does not an investment thesis make. For now, Lockheed Martin remains the odd man out in the race to persuade buyers to pay real money for real drones. And its rivals are winning that race.

General Atomics' Predator drone: A proven winner beats Lockheed's potential winners, hands-down. Photo: General Atomics.