Contracts Flow for Lockheed Martin

Lockheed Martin Corporation ( LMT - Analyst Report ) has received a contract from the U.S. Government worth $1.85 billion for the up gradation of 145 Block 20 F-16A/B aircraft for the Republic of China (“RoC”).

To date, Lockheed has upgraded more than 1,000 F-16s for the U.S. Air Force as well as international customers. Per the contract, the company will also add Active Electronically Scanned Array (AESA) radar, implant global positioning, as well as improve the electronic warfare and other avionics systems of Taiwan's F-16s.

In February, the company had introduced a new version of F-16. It consists of AESA radar, an upgraded mission computer and architecture, and improved cockpits. AESA radars offer significant operational capability improvements.

Off late, the company has been winning new contracts for F-16 in Morocco, Egypt, Oman and Iraq and carrying the production line through 2015. The company is looking for opportunities that would take the production line through 2016-17. Globally, more than 4,500 aircraft have been supplied from assembly lines in five countries. Moreover, major up gradation processes are being built in the F-16 versions in order to keep the fleet modern and fully supportable over the aircraft's long service life.

Meanwhile, the company has received a contract from U.S. Coast Guard for three additional HC-130Js for $218 million, which will bring the total number of HC-130Js to nine from six. Per the contract, the company will also provide two mission suites that are important for the U.S. Coast Guard search and rescue operations. The new aircraft are scheduled to be delivered in early 2015.

Lockheed Martin is the largest U.S. defense contractor that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. Moreover, the company’s diversified business nature protects it from various risks.

Going forward, we expect the company to benefit from a strong defense focus on a number of its platform programs, such as the C-130 Hercules & C-5 Galaxy transport aircrafts, F-16 Fighting Falcon multi-role jet, MH-60 Helicopters, the Advanced Extremely High Frequency & the Global Positioning Satellite III system satellites, the Littoral Combat Ship, the Aegis Weapons System for mobile and sea-based missile defense and the Terminal High Altitude Area Defense system.

The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Outperform recommendation on the stock.

Based in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The company mainly competes with General Dynamics Corporation ( GD - Analyst Report ) and Northrop Grumman Corporation ( NOC - Analyst Report ) .