Lockheed Martin Corporation
) received a $34.1 million contract from the U.S. Air Force for
follow-on production of paveway II Plus Laser Guided Bomb (LGB)
GBU-10, GBU-12 and GBU-16 guidance kits.
With this contract, Lockheed Martin received the majority share
of a $56 million paveway II Plus LGB procurement. Production is
expected to begin in early 2014. The contract is part of an
overall $475 million five-year, firm-fixed-price, multiple-award
contract announced by the U.S. Air Force in August 2011. Lockheed
Martin was qualified as a paveway supplier in 2001.
Under the contract, Lockheed Martin will build and deliver
paveway II Plus LGB kits, consisting of MAU-209C/B computer
control groups that contain the electronic guidance system and
the associated air foil groups that provide lift and stability to
the weapons, in standard GBU-10 MK-84 (2,000 lb.), GBU-12 MK-82
(500 lb.), GBU-16 MK-83 (1,000 lb.) series configurations. All
work will be performed at Lockheed Martin's facility in Archbald,
Lockheed Martin is a qualified provider of all three variants of
paveway II MK-80 series LGBs, and is the sole provider of the
paveway II Enhanced Laser Guided Training Round and Dual Mode
Laser Guided Bomb. Lockheed Martin has delivered more than 65,000
LGB kits to the U.S. Air Force, U.S. Navy and international
customers. Laser guided bombs have been used successfully in
overseas military operations.
Based in Bethesda, Maryland, Lockheed Martin is a global security
and aerospace company, engaged in the research, design,
development, manufacture, integration and sustainment of advanced
technology systems, products and services. Key growth drivers of
the company are its focus on debt repayment, its ongoing share
repurchase program and the incremental dividend. Some of Lockheed
Martin's main competitors are
The Boeing Company
General Dynamics Corporation
A few days back, Lockheed Martin had made an announcement to
increase the quarterly dividend rate to $1.15 per share, up
approximately by 15 cents from the current payout of
approximately $1.00 per share. The proposed hike would bring the
annual dividend to $4.60, up 15% from the previous payout. The
increased quarterly dividend will be paid on December 28, 2012 to
shareholders of record at the close of business on December 3,
The U.S. defense budget for 2012 was $645.7 billion, with the
base budget at $530.6 billion and $115.1 billion approved for
Overseas Contingency Operations ("OCO") as supplementary defense
spending, mainly to fund ongoing wars. In February this year, the
Department of Defense ("DoD") requested a Pentagon base budget of
$525.4 billion for 2013, which is approximately $5.1 billion or
1% less than what is approved for fiscal 2012, with $88.5 billion
earmarked for OCO spending.
In early August 2012, the subcommittee recommended $511 billion
for DoD's base budget and $93 billion for OCO spending, for a
total of $604.5 billion for fiscal 2013.
Going forward, we believe Lockheed Martin has significant upside
potential based on the Obama administration's focus on
Intelligence Surveillance Reconnaissance (ISR), unmanned systems,
force protection, cybersecurity, and missile defense. It already
sits on an order backlog of approximately $75.5 billion at the
end of the first half of 2012.
The company is expected to release its third-quarter 2012 results
on October 24, 2012. The Zacks Consensus Estimates for
third-quarter 2012 and fiscal 2012 are currently pegged at $1.85
per share and $8.10 per share, respectively.
We currently maintain our long-term Outperform recommendation on
Lockheed Martin based on revenue growth, improved earnings
guidance, incremental dividend payout and stable order backlog.
Also, shareholder return will continue to be shored up by the
company's focus on debt repayment, its ongoing share repurchase
program and the incremental dividend. In the near term, however,
Lockheed Martin carries a Zacks #4 Rank implying a short-term
Sell rating for the next 1-3 months.
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