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Lockheed Martin (LMT) Scores Big on F-35 Contract for Lot 11

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Lockheed Martin Corp.LMT has secured a contract from the U.S. Navy to buy titanium and other materials needed to build the 11th batch of the F-35 fighter jets. The contract is valued at $1.17 billion.

Under this advance acquisition contract, Lockheed Martin will provide 80 F-35A aircraft (28 for the U.S. Air Force; 6 for Norway; 4 for Turkey; 8 for the Netherlands; 8 for Australia; 10 for Israel; 6 for Japan; and 10 for South Korea); 7 F-35B aircraft (6 for the U.S. Marine Corps and 1 for the United Kingdom); and 4 F-35C aircraft for the U.S. Navy.

Lockheed Martin is also entitled to produce 2 F-35A aircraft for the U.S. Air Force and F-35C aircraft for the U.S. Navy, per the contract. Work under this contract is expected to be completed in Dec 2019.

Apart from this major win, Lockheed Martin's Aeronautics unit won a $84.4 million cost-plus-fixed-fee modification contract related to Lot 9 F-35 Lightning II Joint Strike Fighter advance acquisition contract for the procurement of production non-recurring items. The contract covers special tooling and special test equipment items that are important to meet current and future production rates for the U.S. Air Force, U.S. Navy , U.S. Marine Corps; and non-U.S. DoD participants. Work will be performed in Orlando, FL (98%) and Fort Worth, TX (2%), and is slated for completion in Dec 2018.

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 expects organic growth in 2016 to be led primarily by the Aeronautics segment and specifically by the F-35 program. Although the F-35 program faced technical engine related issues earlier in 2014, management expects margins on production contracts to increase at least 100 basis points in 2015.

Meanwhile, the Pentagon said that Lockheed Martin achieved its target of delivering 45 F-35 fighter jets to the U.S. government and key allies in 2015. This represented a 25% increase from 2014, bringing the total number of jets delivered to 154. Deliveries are expected to exceed 50 next year.

"Meeting aircraft production goals is a critical stepping stone in demonstrating the program is ready for the expected significant production ramp-up," said Lt. Gen. Chris Bogdan, F-35 Program Executive Officer, in a prepared statement.

Importantly, Lockheed Martin reported stellar third-quarter results with better-than-expected earnings along with higher revenues, solid margins, and strong cash flows, buoyed by robust sales of its F-35 Joint Strike Fighter.

Zacks Rank

Lockheed Martin carries a Zacks Rank #3 (Hold). Some favorably ranked stocks in the aerospace and defense space are Leidos Holdings, Inc. LDOS , sporting a Zacks Rank #1 (Strong Buy), and Huntington Ingalls Industries, Inc. HII and General Dynamics Corporation GD , both carrying a Zacks Rank #2 (Buy).

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GENL DYNAMICS (GD): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

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LEIDOS HOLDINGS (LDOS): 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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