Lockheed (LMT) Wins Contract to Aid F-35 Fighter Jet Program

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently secured a modification contract involving its F-35 Joint Strike Fighter aircraft program. The award has been provided by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $71.4 million, the contract is expected to be completed by December 2025. The latest modification offers scope to Lockheed to provide hardware in the loop primary mission equipment for labs supporting the integration and sell-off of F-35 jets.

The majority of the work related to this contract will be carried out in Fort Worth, TX. The award will serve the U.S. Navy, Air Force, Marine Corps, and non-U.S. Department of Defense partners.

Importance of F-35 for LMT

Lockheed enjoys a dominant position in the global military aircraft space with its F-35 fleet. The stealth aircraft boasts features that make it an ideal choice for many nations. The company’s constant efforts to modernize and upgrade the aircraft using advanced technologies to meet current warfare needs boost demand significantly.

The F-35 program remained the largest revenue generator for the Aeronautics business unit. It also accounted for 66% of the segment’s net sales in 2022.

Lockheed has delivered 974 F-35 airplanes since the program's inception, with 391 jets in the backlog as of Sep 24, 2023.  This, along with the latest contract win, boosts sales expectations for the segment.

Looking ahead, LMT expects to deliver 97 F-35 jets in 2023 and 147-153 aircraft in 2024. The jet deliveries for 2025 and beyond are still estimated to be 156. Successful delivery of the F-35 jets in due time, as expected by the company, should significantly bolster its revenues in the coming quarters.

Growth Prospects

Amid the widespread geopolitical tensions prevalent across the globe, nations are rapidly augmenting their defense purchase 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.

Looking ahead, per a report by the Mordor Intelligence firm, the global military aviation market is expected to witness a CAGR of 7.37% during 2023-2028.

Such projections indicate immense opportunities for Lockheed to reap the benefits of the military aviation market’s expansion, with its Aeronautics business segment engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft.

Notably, Aeronautics’ major programs include the C-130 Hercules international tactical airlifter, the F-16 Fighting Falcon jet and the F-22 Raptor stealth fighter aircraft, in addition to F-35 jets.

Peer Opportunities

Some other prominent defense majors involved in the manufacturing of military aircraft that are expected to gain from the military aviation market’s growth opportunities are Northrop Grumman NOC, Airbus Group EADSY and Textron TXT.

Since its inception, Northrop Grumman has been a pioneer in the development of manned aircraft. From fighter jets and stealth bombers to surveillance and electronic warfare, it has been providing manned solutions to customers worldwide. The company 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.

NOC’s Aeronautics Systems unit is engaged in the design, development, production, integration, sustainment and modernization of advanced aircraft systems. Meanwhile, the Mission Systems segment offers advanced mission solutions and multifunction systems like Airborne Early Warning & Control, the LONGBOW Fire Control Radar and the Scalable Agile Beam Radar.

Airbus Group’s military aircraft consists of the A400M, the C295 tactical transporter, the new-generation A330 Multi Role Tanker Transport and the Eurofighter, the most advanced swing-role fighter ever conceived.

The company has been providing its aircraft customers with an extended portfolio of services for more than 40 years, ranging from the training of flight and ground staff to live firing exercises anywhere worldwide.

Textron’s military aircraft includes the Beechcraft T-6 training aircraft and the Beechcraft AT-6 light-attack aircraft. The company also manufactures the Beechcraft Model 18 light bomber, the T-44 and T-34 training aircraft, and the T-1A jet trainer.

TXT’s subsidiary, Able Aerospace Services, provides component and maintenance, repair and overhaul services in support of commercial and military fixed and rotor-wing aircraft.

Price Movement

Shares of Lockheed have risen 11.2% in the past three months compared with the industry’s 21.4% growth.

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Zacks Rank

Lockheed currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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