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Lockheed Martin Wins $266M Deal to Aid F-35 Aircraft Program

Zacks Equity Research

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently secured a contract for supplying special tooling and special test equipment to support the F-35 Lightning II aircraft program. The deal has been awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Valued at $266.2 million, the contract will cater to the U.S. Air Force, Navy, Marine Corps and non-U.S. Department of Defense (DoD) participants. Work related to the deal is scheduled to be over by July 2022. Majority of the task will be carried out in Fort Worth, TX.

A Brief Note on F-35 Program

The F-35 Lightning is a supersonic, multi-role fighter jet that represents a quantum leap in air-dominance capability, offering enhanced lethality and survivability in hostile, anti-access airspace environments. It is being used by the defense forces of the United States and 11 other nations chiefly 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 generates more than 25% of its total sales. The program fueled annual revenue growth by 19.6% at the company’s Aeronautics division. Keeping up with this trend, we may expect the latest contract win to help the Aeronautics unit deliver similar or even better performance in the upcoming quarters.

The production of F-35 is expected to improve 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 global demand for military jets.

Taking into account the F-35 program’s solid estimated production rate, the latest contract win should further provide a boost to this program in the coming days.

Such developments reflect solid prospects for Lockheed Martin’s F-35 program, which are likely to boost the company’s profit margin.

Price Movement

In a year’s time, shares of Lockheed Martin have gained 19.7% compared with the industry’s 9.5% rise.

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, Leidos Holdings, Inc. LDOS and Wesco Aircraft Holdings, Inc. WAIR, each of which carries a Zacks Rank #2 (Buy). 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 average positive earnings surprise of 4.21% in the last four quarters.

Leidos delivered average positive earnings surprise of 6.51% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 2% to $4.69 over the past 90 days.

Wesco Aircraft’s long-term growth estimates currently stand at 12%. The Zacks Consensus Estimate for 2019 earnings has increased 1.2% to 85 cents over the past 60 days.

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