U.S. Markets closed

Lockheed Martin Wins $348M Navy Deal to Aid F-35 Program

Zacks Equity Research

Lockheed Martin Corp.’s LMT Aeronautics business division recently won a modification contract to support low-rate initial production of F-35 Lightning II aircraft’s 12th Lot. Majority of work related to the deal will be executed in Fort Worth, TX, and El Segundo, CA.

Details of the Deal

Valued at $348.2 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Under the agreement, Lockheed will produce non-recurring, special tooling and special test equipment for the F-35 jets.

The deal, with expected completion date of August 2022, will cater to the U.S. Air Force, Navy, Marine Corps, non-U.S. Department of Defense (DoD) partners and foreign military sales (FMS) customers.

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 demand for military jets globally.

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 22.8% compared with the industry’s 7.8% rise.

Zacks Rank & Key Picks    

Lockheed Martin currently carries Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are General Dynamics Corp. GD, Northrop Grumman Corp. NOC and Textron Inc. TXT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Dynamics’ long-term earnings growth estimate currently stands at 8.9%. The Zacks Consensus Estimate for 2019 earnings has moved 0.3% up to $11.76 over the past 90 days.

Northrop Grumman’s long-term earnings growth estimate currently stands at 12.8%. The Zacks Consensus Estimate for 2019 earnings has climbed 2.5% to $19.41 over the past 90 days.

Textron’s long-term earnings growth estimate is pegged at 12.6%. The Zacks Consensus Estimate for 2019 earnings has moved 0.8% north to $3.70 over the past 90 days.

The Hottest Tech Mega-Trend of All                 

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
General Dynamics Corporation (GD) : Free Stock Analysis Report
Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Textron Inc. (TXT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research