End of the road for F-22

On Tuesday July 21, the Senate voted 58-40 and sent Lockheed Martin Corporation’s (LMT)) F-22 fighter to an early perdition. The air superiority fighters had entered the air force in 2005. The vote removed $1.75 billion set aside for seven more F-22s in the $680 billion 2010 defense bill. 

The twin-engine F-22 Raptor fighter touted as the most advanced in the world was shelved primarily due to a lack of sophisticated planes to shoot at. Although advocates of F-22 put forward the Chinese and Russian menace, it looked too far fetched to convince the Senate and the White House. 

The U.S. already has 187 of these Raptors. But the need of the day to tackle ground enemies dictates more low-cost F-35 Joint Strike Fighters and unmanned UAVs. The defense bill has thus allotted berth to 30 F-35s in the armory, which are also manufactured by Lockheed Martin. This single engine plane is designated to eventually replace the vintage F-16s. 

The F-22 pill would not be easily swallowed by Lockheed Martin, since only the Aeronautics segment witnessed any upside in the second quarter 2009 results. With lower volumes in the C-130J and C-5 programs, the company in the near term will look for growth in Aeronautics only through the F-35 program. We reiterate our BUY rating on LMT.

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