Aerospace and Defense major Lockheed Martin Corporation ( LMT ) has recently decided to manufacture Liquefied natural gas (LNG) tanks for storage and transportation. The market reaction was positive, with shares gaining 52 cents or 0.38%, ending the trading session at $137.98 yesterday.
Lockheed entered into an agreement with Wartsila, a Finnish power solution provider and Harvey Gulf International Marine LLC, a marine transportation company to manufacture cryogenic LNG storage tanks.
Lockheed Martin has expertise in production of fuel storage tanks and has supplied external tanks for NASA's Space Shuttle program for the past four decades. The company intends to utilize its technical know how for the manufacture of the LNG storage tanks.
The U.S. has a huge reserve of natural gas. Introduction of new drilling technology has not only lowered cost of production, but also increased the volume of production. Natural gas has gained importance across the globe for its clean burning nature and its usage in industrial and electricity production is increasing each day.
The demand for natural gas has been increasing in European and some Asian countries, where the domestic production of gas is much lower than demand. Import of gas is therefore the best possible solution to meet the increasing domestic demand. The U.S. government after much deliberation, has begun to grant permission for export of natural gas.
However, exporting a larger volume of natural gas is not possible due to its gaseous state, so the only solution available is to cool natural gas to - 259 degrees Fahrenheit through a process known as liquefaction. This process results in LNG which can be transferred in large vessels across continents in special storage tanks.
Given the surging global demand for natural gas, the demand for tanks to store and transport will increase in the long run. We appreciate the initiative taken by the company to explore other options for generation of revenue, apart from just the defense contracts.
Lockheed also has the advantage of utilizing its existing infrastructure for storage tank production. The tanks will be manufactured in its 43 acre indoor facility at NASA's Michoud Assembly Facility in New Orleans, La.
Lockheed presently carries a Zacks Rank #3 (Hold). However, some better-ranked aerospace and defense stocks include The Boeing Company ( BA ), General Dynamics Corp. ( GD ) and Northrop Grumman Corporation ( NOC ). All of the stocks carry a Zacks Rank #2 (Buy).