Lockheed Martin Wins $151M Deal to Aid F-35 Aircraft Program

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently secured a modification contract to procure long-lead items for the manufacture and delivery of 21 F-35 Lightning II low-rate initial production aircraft from the 14thLot. The deal has been awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Valued at $151.3 million, the contract will cater to the governments of Australia and Norway. Work related to the deal is scheduled to be over by December 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 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 lost 14.3% compared with the industry’s 3.8% decline.

Zacks Rank & Key Picks    

Lockheed Martin currently carries Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Spirit Aerosystems Holdings SPR, Heico Corporation HEI and AeroVironment, Inc. AVAV. While Spirit Aerosystems sports a Zacks Rank #1 (Strong Buy), Heico and AeroVironment carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Spirit Aerosystems’ long-term growth estimate currently stands at 7.8%. The Zacks Consensus Estimate for 2019 earnings has moved 3.7% up to $7.56 over the past 90 days.

Heico delivered average positive earnings surprise of 4.8% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 2.9% to $2.14 over the past 90 days.

AeroVironment’s long-term growth estimate is pegged at 25%. The Zacks Consensus Estimate for 2019 earnings has moved 16.67% north to $1.75 over the past 90 days.

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