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Lockheed Martin Hits a 52-Week High on Promising Deals

On Jul 8, 2016, shares of Lockheed Martin Corp.LMT soared to a new 52-week high of $252.30. The stock pulled back a bit to end the trading session on Friday at $251.90. This defense prime with a market cap of around $76.69 billion has seen its shares rise roughly 17.7% so far this year as against a 4.2% increase for the S&P 500 over the same period.

LOCKHEED MARTIN Price and Consensus

LOCKHEED MARTIN Price and Consensus | LOCKHEED MARTIN Quote

What's Driving Lockheed Martin Up?

Lockheed Martin has lately secured quite a few major contracts from the Pentagon, helping it to remain in the limelight. The stock rose last Friday after the company said that it is set to secure a multi-billion-dollar contract from the Pentagon for the next batch of F-35 Joint Strike Fighter stealth jets.

The company also sees a potential deal for the F-35 from other markets like Switzerland as the country looks to reconstitute its aborted fighter replacement program, as per statements made by the executive vice president Jeff Babione ahead of the Farnborough International Airshow in Hampshire, England.

Moreover, late last month, the Defense Logistics Agency awarded Lockheed Martin a potential $1.75 billion contract to provide consumable and depot-level repairable components for various weapon systems of the U.S. military. The Pentagon's prime contractor will provide the weapon components to the U.S. Army, Navy, Air Force and Marine Corps.

Lockheed Martin receives a steady inflow of follow-on orders from its leveraged presence in the U.S. Army, Air Force, Navy and IT programs. The company expects organic growth of 3-5% to be led primarily by the Aeronautics segment and specifically by the F-35 program. For 2016, it expects to deliver 53 more F-35s. Production of the aircraft is expected to continue for many years given the U.S. government's current inventory target of 2,443 aircraft for the Air Force, Marine Corps and Navy.

Lockheed Martin continues to be a strong cash generator, helping it to take important cash deployment decisions. In the first quarter of 2016, the company's cash from operations was $1.56 billion, up 63.3% year over year. With about $151 million in capital expenditures in the quarter, it had $1.41 billion of free cash flow. It returned $1 billion to its stockholders in the first quarter 2016.

A politically unstable planet despite tottering economies has led to various nations stepping up their defense capabilities. The direct beneficiary of a volatile geo-economy is undoubtedly the aerospace and defense players. Lockheed Martin with its leading position is expected to get a boost from rising international weapons sales.

Zacks Rank

Lockheed Martin currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace/defense space include Northrop Grumman Corp. NOC , Raytheon Co. RTN , Rockwell Collins Inc. COL , all with a Zacks Rank #2 (Buy).

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NORTHROP GRUMMN (NOC): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

ROCKWELL COLLIN (COL): 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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