Lockheed Supports SW Asia Operations

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Lockheed Martin Corp. (LMT) received a contract from the Department of Defense (DoD) worth $138.5 million to provide Communications Technical Support Services (“CTSS”) to the U.S. Air Force Central Command.

Per this contract, the company will supply important information to forward-deployed forces in Operation Enduring Freedom (Afghanistan) and Operation New Dawn (Iraq).

The CTSS program will also deliver critical information to forces deployed in other parts of Southwest Asia. The company will begin providing services from Sep 2013 which will continue through Sep 20, 2014. The contract also has an option to be extended for three months, which if implemented would extend the contract through Dec. 20, 2014.

The DoD has recently been doling out contracts to the defense companies. Lockheed Martin among others has been a key beneficiary of these awards. Recently, Mission Systems and Training, a business wing of Lockheed Martin, won a $295 million contract from the DoD for work on the Aegis missile defense. This is a sole-source, cost-plus-incentive-fee/cost-plus-award-fee/cost-plus-technical-schedule incentive fee contract modification, under which Lockheed Martin will provide system engineering and program management services.

Prior to that, Data Link Solutions, Alliant Techsystems Inc. (ATK), FLIR Systems Inc. (FLIR) and Lockheed Martin also received a number of DoD contracts. A total of 22 contracts were issued that had a cumulative value of less than $500 million.

Going forward, we expect Lockheed Martin to benefit from a strong defense focus on a number of its platform programs, such as the C-130 Hercules & C-5 Galaxy transport aircrafts, F-16 Fighting Falcon multi-role jet, MH-60 Helicopters, the Advanced Extremely High Frequency & the Global Positioning Satellite III system satellites, the Littoral Combat Ship, the Aegis Weapons System for mobile and sea-based missile defense and the Terminal High Altitude Area Defense system.

Despite the lurking fears of sequestration and its adverse impact on U.S. defense budgets, we expect Lockheed Martin to register a stable performance in the long run due to a leveraged presence in the Army, Air Force, Navy and IT programs. The company presently retains a short-term Zacks Rank #3 (Hold).

In the near term, we would advise investors to accumulate its short-term Zacks Rank #1 (Strong Buy) peer Erickson Air-Crane Inc. (EAC).

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