Lockheed Bags a $4B Order for F-35 - Analyst Blog

Military aircraft designers at Lockheed Martin Corporation ( LMT ) have received a sizeable contract worth $4 billion from U.S. Naval Air Systems Command at Patuxent River Naval Air Station, Maryland for 30 F-35 Joint Strike Fighters ("JSF"). However, the final pricing of the aircraft and other terms are still under negotiation.

The F-35 Lightning II is a family of single-seat, single-engine, fifth generation multi-role fighters that are designed to perform ground attack, reconnaissance, and air defense missions with stealth capability. It is the next-generation strike aircraft for the Navy, Air Force, Marines and U.S. allies.

As per the contract, the company will build advanced combat aircraft and advanced avionics for the U.S. Air Force, Navy and Marine Corps. The F-35 aircrafts will be built under low-rate initial production lot V ("LRIP-5") for the F-35 Lightning II program.

Originally, under the LRIP-5 program, the company had to build 35 jets. However, it was reduced to 30 jets due to the increase in costs and delay in the fighter's development program.

For the Air Force, F-35 comes in a conventional-takeoff-and-landing ("CTOL") version; while for the Navy, it comes in an aircraft carrier variant ("CT") version. It comes in a short-take-off-and-vertical-landing ("STOVL") version for the Marine Corps. The 30 jets include 21 CTOL F-35s ordered by the US Air Force, six CT F-35s ordered by the Navy and three STOVL F-35s for the Marine Corps.

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs.

The company continues to benefit from strong defense spending on a number of its platform programs, such as the F-35 Lightning II Joint Strike Fighter, C-130 Hercules & C-5 Galaxy transport aircrafts, F-16 Fighting Falcon multi-role jet, MH-60 Helicopters, the Littoral Combat Ship, the Aegis Weapons System for mobile and sea-based missile defense and the Terminal High Altitude Area Defense system.

However, we currently remain on the sidelines due to U.S. economic fundamentals being kept on a leash as the Euro crisis continues. Thus the risk of further cutbacks in defense budgets is high.

The company expects to release its fourth quarter and fiscal 2011 results on January 23, 2012. The Zacks Consensus Estimates for fourth quarter and fiscal year 2011 are currently at 1.93 per share and $7.61 per share, respectively.

Akin to its peers, Northrop Grumman Corporation ( NOC ) and Raytheon Company ( RTN ), the company presently retains a short-term Zacks #3 Rank (Hold) rating. We have a long-term Neutral recommendation on the stock.

LOCKHEED MARTIN ( LMT ): Free Stock Analysis Report

NORTHROP GRUMMN ( NOC ): Free Stock Analysis Report

RAYTHEON CO ( RTN ): 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 Nasdaq, Inc.

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

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