Lockheed Wins Four in a Row - Analyst Blog


Lockheed Martin Corp. ( LMT ) turned out to be the major beneficiary of the 20 contracts, worth $717.7 million, handed out by the Department of Defense (DoD) very recently. Indeed the company secured four contracts that comprised nearly 20% of the entire award from the DoD.

Discussed below is the series of contract wins by the largest defense contractor in the world.

Lockheed Martin received a cost-plus-incentive-fee, firm-fixed-price contract worth $111.5 million for the development, integration and production of AN/SQQ-89A (V) 15 Surface Ship Undersea Warfare Systems. This system allows a surface warship to detect and track marine contacts and torpedo threats. The task will be performed under a foreign military sales contract for the Japan Self-Defense Force. It is expected to be completed by May 2014.

The second contract worth $29.7 million was a sole-source, cost-plus-incentive-fee contract modification. Per the contract, Lockheed Martin will provide system engineering and program management services for the post certification support of Aegis Ballistic Missile Defense baselines 4.0.X, 5.0 and 5.0 capability upgrade. This contract will increase the contract value to $1.44 billion from $1.41 billion. This contract extension runs through Dec 2014.

The third $48.2 million firm-fixed-price, multiple-award, task-order is on a sharing basis. This modification contract to provide engineering services to the U.S. Army Corps of Engineers will be carried out by Lockheed Martin, ABM Industries Inc. ( ABM ), LB&B Associates, J&J Maintenance, and EMCORE Corp. ( EMKR ).

Finally, as per the cost-plus-fixed-fee contract worth $8.2 million, the company will supply Affordable Phased Array Sensor Systems to the U.S. Army.

Lockheed Martin's order book seems to be overflowing at present with its customer base comprising the U.S. government, foreign governments and other commercial buyers. Going forward, we believe that the company has significant upside potential based on the Obama administration's focus on Intelligence Surveillance Reconnaissance, unmanned systems, force protection, cyber security, and missile defense.

However, as a large percentage of the company's business comes from the U.S. government, we apprehend cuts in defense spending could limit the the company's operating results. The company presently retains a short-term Zacks Rank #3 (Hold).

In the near term, we would advise investors to accumulate its short-term Zacks Rank #1 (Strong Buy) peer Erickson Air-Crane Inc. ( EAC ).

ABM INDUSTRIES (ABM): Free Stock Analysis Report

ERICKSON AIR-CR (EAC): Free Stock Analysis Report

EMCORE CORP (EMKR): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ABM , EAC , EMKR , LMT , V



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