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Lockheed Martin Corporation (LMT - Analyst Report) was awarded a $253 million contract for the F-35 Lightning II Joint Strike Fighter Low Rate Initial Production IV.

The F-35 Lightning II is a family of single-seat, single-engine, fifth generation, multi-role fighters that are designed to perform ground attack, reconnaissance, and air defense missions with stealth capability. It is the next-generation strike aircraft for the Navy, Air Force, Marines and U.S. allies.

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. Going forward, we believe Lockheed Martin has significant upside potential based on the Obama administration’s focus on Intelligence Surveillance Reconnaissance, unmanned systems, force protection, cyber security, and missile defense.

The company continues to benefit from strong defense spending on a number of its platform programs, such as the F-35 Lightning II Joint Strike Fighter, C-130 Hercules & C-5 Galaxy transport aircrafts, F-16 Fighting Falcon multi-role jet, MH-60 Helicopters, the Littoral Combat Ship, the Aegis Weapons System for mobile and sea-based missile defense and the Terminal High Altitude Area Defense system.

However, these positives are dampened by defense budget cuts, headwinds in margins, higher pension liability and risk regarding retrenchment cost recovery. The U.S. economic fundamentals are basically being kept on a tight leash as the Euro-crisis continues to cast its spell over financial markets keeping risks of further cutbacks in future defense budgets at a high point. The Zacks forecast of GDP growth for the second half of 2011 is now at just around 2.7%. This culminates into a GDP growth rate of 2.9% for fiscal 2011. Our apprehension is fuelled by $15 trillion of national debt and an unemployment rate hovering around 9% which would lead to the Budget Control Act’s dictum of automatic cutbacks across the board from fiscal 2013. This would surely not result in any extra bacon for defense goliaths in general and Lockheed Martin in particular.

Lockheed Martin expects to release its fourth quarter and fiscal 2011 results on January 23, 2012. The Zacks Consensus Estimates for fourth quarter and fiscal year 2011 are currently at $1.93 per share and $7.61 per share, respectively.

Lockheed Martin presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. The company mainly competes with Northrop Grumman Corporation (NOC - Analyst Report) and Raytheon Company (RTN - Analyst Report).

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