Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently clinched a modification contract involving its F-35 fighter jets. The award has been offered by the Naval Air Systems Command, Patuxent River, MD.
Details of the Deal
Valued at $181 million, the contract is expected to be completed by January 2027. Per the terms of the deal, Lockheed will procure various special tooling and test equipment to support the production of F-35 aircraft.
The contract will serve the U.S. Air Force, Navy, Marine Corps, and non-U.S. Department of Defense (DOD) participants. Work related to this deal will be executed in Garden Grove, CA.
Significance of F-35 Jets
Lockheed’s F-35 is the most lethal, survivable and connected fighter jet in the world. It has the ability to securely connect high-tech platforms to share information across every domain — air, land, sea, space and cyber.
Such remarkable features of this fighter jet are likely ushering in solid contract wins for LMT, like the latest one. Consequently, the F-35 program remains a major revenue contributor for the United States’ largest defense contractor.
Evidently, the F-35 program was the largest revenue generator for Lockheed’s Aeronautics business unit, accounting for 64% of the segment’s net sales in 2023 and 26% of LMT’s consolidated net sales. Lockheed has delivered 992 F-35 airplanes since the program's inception, with 373 jets in the backlog as of Dec 31, 2023. This indicates the solid demand that the F-35 program enjoys in the combat jet market and thereby reflects solid revenue growth prospects for Lockheed.
Growth Prospects
Amid the geopolitical tensions prevalent across the globe, nations are rapidly augmenting defense purchases to strengthen their warfare capabilities. This has led to an increased demand for fighter jets, which form an integral part of a country’s defense products. Per a report by the Mordor Intelligence firm, the global military aviation market is estimated to witness a CAGR of 5.23% during 2024-2030.
Such projections indicate immense growth opportunities for prominent combat jet manufacturers like Lockheed. Its Aeronautics segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. The company’s fighter jet portfolio includes C-130 Super Hercules, F-16 Fighting Falcon jet and F-16 Fighting Falcon, in addition to F-35 jets.
Peer Opportunities
A few other defense players that can gain from the expanding military aircraft market are Airbus SE EADSY, Boeing BA and Northrop Grumman NOC.
Airbus’ military aircraft consists of A400M, C295 tactical transporter, the new-generation A330 Multi Role Tanker Transport and Eurofighter, the most advanced swing-role fighter ever conceived. The company delivered a total of 1,783 military aircraft as of Dec 31, 2023.
EADSY boasts a long-term (three-to-five years) earnings growth rate of 12.4%. The Zacks Consensus Estimate for Airbus’ 2024 sales indicates an improvement of 9.5% from the top line reported in 2023.
Boeing’s product portfolio includes a range of combat-proven aircraft like the F/A-18 Super Hornet, P-8, C-17 Globemaster III, EA-18G and a few more. In 2023, Boeing delivered 22 F/A-18s, nine F-15s, three T-7A Red Hawks and 11 P-8 models.
BA boasts a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for Boeing’s 2024 sales indicates an improvement of 12% from the top line reported in 2023.
Northrop Grumman has built some of the world’s most advanced aircraft, ranging from the innovative B-2 Spirit stealth bomber to the game-changing E-2D Advanced Hawkeye. The significant awards won by NOC in 2023 included $2.1 billion for F-35 programs, $1.7 billion for E-2 and $1.5 billion for Triton.
NOC boasts a long-term earnings growth rate of 10.1%. The Zacks Consensus Estimate for Northrop Grumman’s 2024 sales indicates an improvement of 4.6% from the top line reported in 2023.
Price Performance
In the past month, shares of LMT have risen 3.7% compared with the industry’s 0.7% growth.
Image Source: Zacks Investment Research
Zacks Rank
Lockheed currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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