Lockheed Martin Corp.
) has been selected among one of the 15 awardees for an
Indefinite-Delivery/Indefinite-Quantity ("IDIQ") contract from
the U.S Navy. Under the Space and Naval Warfare Systems Center
("SSC") Atlantic's Business and Force Support Multiple Award
Pillar contract, the company will provide a variety of
operational support services. The contract is worth a cumulative
$900 million for all awardees, if all options are implemented.
ERICKSON AIR-CR (EAC): Free Stock Analysis
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Per the contract, Lockheed Martin will be responsible for
providing technical services associated with full system
lifecycle support of computers and combat systems. These services
will help the Navy in carrying out battle, business and
Only last month, the company turned out to be one of the major
beneficiaries of the 20 contracts, worth $717.7 million, handed
out by the Department of Defense (DoD). The company secured four
contracts that comprised nearly 20% of the entire award from the
At its first quarter earnings call, the company reaffirmed its
faith in its products. Lockheed Martin believes its products are
a primary component in the preservation of global security.
Rising tensions and threats in the Korean peninsula along with
ongoing conflict and instability in the Middle East compel the
countries to maintain global security. We expect Lockheed Martin
to register a stable performance in the long run due to a
leveraged presence in the Army, Air Force, Navy and IT programs.
However, a large percentage of its business comes from the U.S.
government. So cuts in defense spending could limit the results
of its operating segments. Also, the situation is worsened with
the wind down of war in Afghanistan and the effects of
According to media reports, budget cuts from sequestration
reduced the number of contracts awarded by the DoD in April. The
DoD only awarded contracts worth $19 billion, down 52% from Mar
The company during the first quarter earnings release had assumed
this decline and had taken into account the effect of
sequestration. Lockheed Martin indicated that it expects 2013
total revenue on the lower end of the guided range of $44,500.0
million to $46,000.0 million. The cut in U.S. military spending
will likely reduce revenues by around $825 million. The company
did not reduce its segment guidance; however it indicated that
one third of the expected $825 million sequestration impact in
2013 could impact sales at each of the IS&GS and Mission
Systems & Training segments, which are generally shorter
cycle businesses than the Missiles & Fire Control,
Aeronautics and Space segments.
Lockheed Martin presently retains a short-term Zacks Rank #3
(Hold). Stocks worth considering are
Erickson Air-Crane Inc.
Northrop Grumman Corp.
Wesco Aircraft Holdings, Inc.
). While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy),
Northrop Grumman and Wesco Aircraft Holdings hold a Zacks Rank #2