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Lockheed Martin (LMT) Wins $1.93B Deal for F-35 Program

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Lockheed Martin Corp.’s LMT Aeronautics business division recently won a $1.93-billion reimbursable contract in relation to the F-35 Lightning II Joint Strike Fighter Air Systems. This deal will cater to the U.S. Air Force, Marine Corps, Navy, non-Department of Defense (DoD) participants, along with foreign military sales (FMS) customers.

Details of the Deal

Per the deal terms, Lockheed Martin will provide a consortium of services, which include ground maintenance activities, depot-activation activities, automatic logistics information system operations and maintenance, health management implementation and support, supply-chain management, along with others.

Work related to the deal will be performed in Fort Worth, TX; Orlando, FL; alongside other locations, and is expected to conclude by December 2020.

The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Rising Demand & Cost-Reduction Initiatives Benefit F-35 Program

Rising security threat from terrorist activities and adverse geopolitical situations have resulted in an increased need for enhancing the nation's defense budget, of which combat aircraft constitutes a major portion. To this end, it is imperative to mention that given its advanced stealth capabilities, combined with fighter aircraft speed and agility, F-35 jet dominates the combat aircraft market.

This is reflected by the program’s frequent contract wins, both from Pentagon and other U.S. allies. For instance, last October, Lockheed finalized a $34-billion agreement, for the production and delivery of 478 F-35s at the lowest aircraft price in the progam’s history.

As far as this program’s market price is concerned, we witnessed a notable drop in the price of this project in recent times, making it all the more lucrative. Unit prices are expected to continue to drop further and the overall price per jet might slip below the $100-million mark in the upcoming period.

Such initiatives, along with continued demand growth, will usher in more contract wins for Lockheed Martin, like the latest one, thereby fueling top-line growth.

Robust Budget Boosting Prospects

The fiscal 2020 budget approved by the U.S. Senate mid-way last year provisioned for a spending plan of $57.7 billion on aircraft. Interestingly, Lockheed Martin’s F-35 program has separately been allotted $11.2 billion,
reflecting a 4.7% increase from the previously-allotted sum. Such stupendous budgetary amendment reflects solid growth prospects for Lockheed Martin’s F-35 program in the days ahead.

Price Performance

Lockheed Martin’s stock has gained 54.8% in the past year compared with the industry’s growth of 29.2%.


Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same space are L3Harris Technology Inc LHX, Air Industries Group AIRI and Leidos Holdings, Inc. LDOS, each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

L3Harris’ long-term growth estimate currently stands at 8%. The company delivered an average positive earnings surprise of 5.02% over the last four quarters.

Air Industries Group delivered an average positive earnings surprise of 52.78% in the last four quarters. The Zacks Consensus Estimate for 2019 loss has narrowed 63.6% to 4 cents over the past 60 days.

Leidos Holdings delivered average four-quarter earnings beat of 8.93%. It currently has a solid long-term earnings growth rate of 7.5%.

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