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Lockheed Martin Wins $328M Deal to Acquire F-35 Components

Zacks Equity Research

Lockheed Martin Corp.’s LMT business unit, Aeronautics, recently won a contract to procure long lead material, parts and components for the F-35 program. These procurements will be done to support production and delivery of 48 F-35A Lightning II aircraft from the 15th Lot.

Valued at $328 million, the deal has been awarded by the Naval Air Systems Command, Patuxent River, MD. Majority of the task will be executed in Fort Worth, TX; El Segundo, CA, and Warton, the United Kingdom. The defense prime is expected to finish the task in June 2023.

Importance of F-35

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.

With increased cross-border tensions gripping varied nations across the globe, both developed and developing nations have been ramping up their defense arsenal over the past decade. Notably, military jets comprise major part of the weapon portfolio. Currently, F-35 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. Last year, 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.

Notably, 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 and overseas customers, and rising global demand for military jets.

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 30.4% compared with the industry’s 15.9% growth.

Zacks Rank & Key Picks    

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

A few better-ranked stocks in the same space are Northrop Grumman NOC, L3Harris Technologies Inc LHX and Leidos Holdings LDOS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northrop Grumman has recorded an average positive earnings surprise of 11.48% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen by 3.8% to $20.38 over the past 90 days.

L3Harris Technologies has recorded an average positive earnings surprise of 5.02% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen by 7.5% to $9.99 over the past 90 days.

Leidos Holdings has recorded an average positive earnings surprise of 8.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen by 4.6% to $4.96 over the past 60 days.

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