Lockheed Martin Corp. (LMT - Free Report) has clinched a $104.7 million modification contract from the Department of Defense (DoD) for the procurement and delivery of 83,169 Xilinx field programmable gate arrays (FPGAs).
The contract calls for Lockheed Martin to deliver FPGAs needed specifically for the manufacture of the low rate initial production Lot VII through full rate production Lot III Joint Strike Fighter aircraft.
Upon completion of the work, this specified Lockheed Martin’s fighter jets will be deployed for the U.S. Air Force, Marine Corps, Navy, as well as for the militaries of Australia, Denmark, Italy, the Netherlands, Norway, Turkey, and the U.K. The company expects to finish the work by September next year in Fort Worth, Texas.
Meanwhile, Lockheed Martin also won a Foreign Military Sales (“FMS”) contract from the U.S. Air Force to support integration of its Joint Air-to-Surface Standoff Missile (“JASSM”) onto Finland's F-18C/D fighters. This award is the second for the Finnish Air Force following the first received in 2012. The contract also involves test missiles, software development and engineering documentation. Finland is Lockheed Martin's second international client for the JASSM system.
JASSM is an autonomous, air-to-ground, precision-guided standoff missile. It provides operational flexibility, reliability and effectiveness required by allied warfighters in achieving their goals. It features a penetrator and blast fragmentation warhead that allows it to work autonomously not only all day and night but in all weather conditions. The missile can successfully find specific points of targets due to its infrared seeker and enhanced digital anti-jam Global Positioning System (“GPS”).
Currently, U.S. Air Force's B-1, B-2, B-52, F-16 and F-15E are supported by JASSM. Internationally, JASSM is certified on the F/A-18A/B for the Royal Australian Air Force.
Over the long run, we expect Lockheed Martin to post a stable performance as a result of its leveraged presence in the Army, Air Force, Navy and IT programs. However, a large percentage of its business comes from the U.S. government. So, cuts in defense spending could limit the results of its operating segments. Also, the situation is aggravated by the wind-down of war in Afghanistan and the effects of sequestration.
According to media reports, budget cuts from sequestration reduced the number of contracts awarded by the DoD in April. The DoD only awarded contracts worth $19 billion, down 52% from Mar 2013.
Lockheed Martin presently retains a Zacks Rank #3 (Hold). Stocks worth considering in the space are Erickson Air-Crane Inc. , Northrop Grumman Corp. (NOC - Free Report) and Wesco Aircraft Holdings, Inc. (WAIR - Free Report) . While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy), Northrop Grumman and Wesco Aircraft Holdings hold a Zacks Rank #2 (Buy).