Lockheed Martin shares jumped Wednesday after Goldman Sachs upgraded the stock to buy from neutral and added it to the firm's so-called conviction list of favorite calls.

The stock was up 2 percent in premarket trading Wednesday following Goldman's note to clients.

Lockheed "increasingly looks to have outgrowth differentiators in an end-market we favor (Defense)," Goldman said. "Margins can expand from current levels in every segment. Free cash can convert at a high rate for a long time. We see upside to FactSet consensus estimates, and the recent pullback in shares makes valuation more attractive."

Lockheed reported better-than-expected results on Tuesday, but the stock failed to respond, rising slightly. The stock is little changed on the year at $321.35.

Goldman also bumped up its 12-month price target to $394 a share from $391.

—With reporting by Michael Bloom