Lockheed Bags Trident Contract

Lockheed Martin Corp. (LMT - Analyst Report) has recently bagged an $853.3 million contract from the U.S. Navy for the Trident II missile production and deployed system support. Work is expected to be completed by Dec 30, 2013.
 
Manufactured by Lockheed Martin Space Systems in Sunnyvale, California, Trident II is a submarine variant ballistic missile. It is extensively used by the U.S. and the U.K. The addition of $853.3 million would boost the beleaguered backlog of the company, which shrunk to $76.4 billion after the first nine months of the fiscal 2009 from $80.9 billion at year-end fiscal 2008. The downside in order backlog came through the cancellation of quite a few high-cost platform programs in recent times. Prominent among them were TSAT Mission Operations System (TMOS) contract, F-22 Raptor program and the VH-71 Presidential Helicopter (VH-71) program.
 
Lockheed Martin remains a key player within the military space and continues to benefit from strong defense spending. The company’s customer base includes the U.S. Government, foreign governments and other commercial buyers. Lockheed’s traditional defense focus appears strong, with increasing interest from domestic and international customers. In addition, management intends to explore strong business opportunities beyond the traditional defense market, specifically in the areas of civil, governmental and commercial space businesses.
 
Going forward, we believe Lockheed Martin has significant upside potential based on strong defense outlays throughout 2009–10, above-industry average return-on-invested-capital and expanding product lines. However, these are offset by risks related to key projects execution, fate of high cost platform programs, lower top-line results in the Aeronautics segment, higher pension liability and lower government satellite programs. We maintain our market Neutral recommendation on the shares.