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U.S. defense’s foremost contractor Lockheed Martin Corp. (LMT - Analyst Report) won three back-to-back contracts from the Pentagon on Friday. The contracts are worth $241.9 million collectively compared to the defense department’s $675.9 million funding.

The largest of these contracts, with a total ceiling value of $124.5 million, entails the development and production of the acoustic rapid commercial-off-the-shelf insertion (A-RCI) and common acoustics processing for Technology Insertion 12 (TI12) through Technology Insertion 14 (TI14) for the U.S. submarine fleet.

A-RCI is a sonar system that integrates and enhances data processing from towed array, hull array, sphere array, and other ship sonar sensors. This latest modification contract runs through Dec 2014.

The second contract, valued at $92.9 million, is a modification order to help out with logistics on Apache attack helicopters undergoing target designation sight/pilot's night vision sensor equipment upgrades. Through this contact, Lockheed Martin actually exercises its second-year option of the contract and work is expected to be completed by Dec 31, 2014.

The third contract, with a value of $24.5 million, is a fixed-price incentive, firm-fixed-price, and cost-plus-fixed-fee contract for the production and support of AN/BQS-25 low-cost conformal arrays (LCCA). These LCCAs are passive planar arrays mounted on the aft submarine sails of submarines. This contract, which is slated to be completed by Mar 2015, includes options which, if exercised, would extend its duration and increase the total value to almost $92.5 million.

Despite budget austerities, this defense behemoth has managed to win Pentagon contracts regularly. The company has won $15 billion in orders during the third quarter. Going forward, the diverse product offerings, strong program execution and cost reduction measures will help the company to sustain its profitability.

Given the lower government spending on defense, we expect Lockheed Martin to trade in line with the broader market indices. Lockheed Martin currently carries a Zacks Rank #3 (Hold). Other defense stocks also worth considering include The Boeing Co. (BA - Analyst Report), Huntington Ingalls Industries, Inc. (HII - Snapshot Report) and Raytheon Co. (RTN - Analyst Report). While Raytheon sports a Zacks Rank #1 (Strong Buy), Boeing and Huntington Ingalls carry a Zacks Rank #2 (Buy).

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