Lockheed Martin Wins $22.7B Deal for F-35 Aircraft Program
Lockheed Martin Corp.’s LMT Aeronautics division recently secured a $22.7-billion modification contract for delivering 255 aircraft related to the F-35 program. The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland.
Details of the Deal
Per the deal, the Aeronautics unit will supply 106 F-35 aircraft to the U.S. services, which include 64 F-35A aircraft for the Air Force, 26 F-35B for the Marine Corps and 16 F-35C for the Navy. The company will also deliver 89 F-35 aircraft to non-Department of Defense (DoD) participants and 60 F-35s to Foreign Military Sales customers.
Majority of the work related to the deal will be executed in Fort Worth, TX. The entire task is expected to be completed in March 2023.
F-35 Program Attributes
The F-35 Lightning is a supersonic, multi-role fighter jet, which represents a quantum leap in air-dominance capability, offering enhanced lethality and survivability in hostile, anti-access airspace environments. Its advanced stealth allows pilots to penetrate into areas without being detected by enemy radars. It is being used by the defense forces of the United States and 11 other nations, largely owing to its advanced stealth, integrated avionics, sensor fusion, superior logistics support and powerful integrated sensors capabilities.
What Favors Lockheed Martin?
The F-35 is Lockheed Martin’s largest program that generated 27% of its total sales in third-quarter 2018. The program drove annual revenue growth for the company’s Aeronautics division by 19.6%. Keeping up with this trend, we may expect the latest contract win to enable Aeronautics unit to deliver similar or even better performance in the upcoming quarters.
Meanwhile, production of F-35 is expected to rise in the years ahead, given the U.S. government’s current inventory objective of 2,456 aircraft for the Air Force, Marine Corps and Navy along with commitments from the company’s eight international partners, overseas customers and rising demand globally.
Furthermore, the fiscal 2019 defense budget provisions for a spending plan of $21.7 billion on aircraft. The budget hints at a prospective increase in Lockheed Martin’s F-35 Joint Strike Fighter program that has been allotted $10.7 billion along with additional funding for the procurement of 97 F-35 Joint Strike Fighters. Such developments reflect solid growth prospects for Lockheed Martin’s F-35 program, which, in turn, are likely to boost the company’s profit margin.
Price Movement
Lockheed Martin’s stock has declined 2.3% in the last year against the industry’s growth of 9.1%. The underperformance may have been caused by the intense competition the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically and internationally.
Zacks Rank & Other Key Picks
Lockheed Martin currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the same sector are Aerojet Rocketdyne Holdings AJRD, Raytheon Company RTN and Curtiss-Wright Corporation CW.
While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Raytheon and Curtiss-Wright carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 in the past 90 days
Raytheon delivered average positive earnings surprise of 6.71% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 1.6% to $10.09 cents in the past 90 days.
Curtiss-Wright pulled off average positive earnings surprise of 19.86% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 1.3% north to $6.23 in the past 90 days.
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