The largest U.S. defense operator,
Lockheed Martin Corp.
) received three back-to-back contracts from the Department of
Defense (DoD), fetching $875 million or approximately 84% of the
total orders awarded on Mar 25.
The prime award was a $698 million fixed-price-incentive, firm
target, advanced acquisition order for the procurement of
long-lead parts, materials, and components required to build 57
Low-Rate Initial Production, or LRIP, Lot IX F-35 Lightning II
Joint Strike Fighters. The contract includes aircraft for the
U.S. Air Force, the U.S. Marine Corps, the U.S. Navy as well as
for other international clients comprising Israel, Norway, U.K.,
Japan and Italy. The work on this contract is expected to be
completed through May 2015.
The F-35 Lightning II Joint Strike Fighter is the 5th Generation
Stealth fighter comprising radar evading stealth, supersonic
speed and extreme agility with the most powerful and wide-ranging
integrated sensor package of any fighter aircraft in history.
The defense prime's F-35 fighter jet engines are made by U.S.
based Pratt & Whitney and U.K.'s BAE Systems as its main
international partner. It also includes
Northrop Grumman Corp.
United Technologies Corp.
) as partners on the F-35.
The second contract, worth $93 million, went to Lockheed Martin's
Mission Systems and Training division. This calls for the company
to exercise options for the production of Aegis Ashore Missile
Defense System (AAMDS) in Poland and to provide multi-year
procurement funding for Aegis Weapon System (AWS) MK 7 equipment
sets. The contract is expected to be completed by Sep 2021.
Finally, Lockheed Martin won an $84.3 million contract to work on
the C-5 Core Mission Computer/Color Weather Radar Engineering,
Manufacturing and Development Program. This contract runs through
Mar 31, 2017.
Lockheed Martin receives over 80% of its revenues from the U.S.
government, including around 60% from the DoD. Although the
threat from sequestration remains for periods beyond fiscal 2015
and casts a shadow of uncertainty about long-term funding, these
defense deals are a testimony to the wide range of products at
the disposal of Lockheed Martin.
It is worth mentioning here that sequestration reduced the
government's defense budget by $37 billion in 2013, which
negatively impacted Lockheed Martin sales. However, in January,
the government increased its limits on discretionary spending in
line with the Bipartisan Budget Act passed in Dec 2013. With a
gradual strengthening of the global economy and the budget issues
drawing to an end, the defense majors are expected to see
stability in 2014.
Lockheed Martin has a Zacks Rank #2 (Buy). A better-ranked stock
in the aerospace and defense industry include
Huntington Ingalls Industries, Inc.
) carrying a Zacks Rank #1 (Strong Buy).
HUNTINGTON INGL (HII): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
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UTD TECHS CORP (UTX): Free Stock Analysis
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