Lockheed Adds $111.4M Contract

The U.S. Air Force has awarded Lockheed Martin Corporation (LMT), the largest U.S. defense contractor, an extension contract worth $111.4 million for its F-22 Raptor fleet. This extension brings the total value of the contract to $709 million.

This $111.4 million contract follows on the contract that was originally granted to Lockheed in 2008 and extended in 2009. Under the 2010 Follow-On Agile Sustainment for the Raptor (FASTeR) Performance-Based Logistics contract, Lockheed will provide weapon systems support of the F-22 Raptors at all operational bases in 2010.

The contract includes training systems, customer support, integrated support planning, supply chain management, aircraft modifications and heavy maintenance, sustained engineering, support products and systems engineering.

Looking ahead, Lockheed focuses on providing total support to its F-22 Raptor customers through a mature supplier base.

The F-22 Raptors, the world's only operational 5th generation fighter, are assigned to seven U.S. bases. While in operation, the F-22 demonstrates a unique combination of stealth, speed, agility, situational awareness and lethal long-range air-to-air and air-to-ground weaponry.  These Raptors are the world's best air dominance fighters and are capable of preventing and defeating current and emerging threats.

Bethesda, Maryland-based Lockheed Martin is a global security company that employs about 136,000 people worldwide. The company principally engages in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

Lockheed announced encouraging second quarter 2010 financial results, with earnings of $1.96 per share. The company’s revenues in the most recent quarter increased 3.3% year over year to $11.4 billion. For fiscal 2010, the company guided revenues in the $45.5 billion – $46.5 billion range and earnings of $7.15 – $7.35 per share. The Zacks Consensus Estimates for 2010 and 2011 are $7.41 and $7.73, respectively.

Lockheed’s customer base includes the U.S. government, foreign governments and other commercial buyers. Profitability at Lockheed is largely contingent on defense spending and the contracts it receives from various defense departments. We believe the company will continue to benefit from higher defense outlays going forward.

Major peers of the company include The Boeing Company (BA), Northrop Grumman Corporation (NOC) and L-3 Communications Holdings Inc. (LLL).

We presently have a Zacks #3 Rank (short-term 'Hold' recommendation) on the stock. We also maintain our "Neutral" recommendation on Lockheed Martin.

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