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Lockheed Wins $710M Deal for Supporting F-35 Jet Production

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Lockheed Martin Corp.’s (LMT - Free Report) Aeronautics business segment recently secured a modification contract for procuring economic order quantities of material to support low rate initial production of F-35 aircraft. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.

Valued at $709.8 million, the contract is expected to be completed by May 2026. The majority of the work related to the deal will be carried out in Fort Worth, TX.

Rise in Demand Benefits F-35 Program

Rising security threat from terrorist activities and adverse geopolitical situations have increased the U.S. government’s need for enhancing the nation's defense budget, a major portion of which is allocated to combat aircraft. The F-35 program is supported by an international team of leading aerospace majors, which makes it a desirable choice for the U.S. Air Force.

Notably, Northrop Grumman (NOC - Free Report) has rendered its expertise in carrier aircraft and low-observable stealth technology to this program. BAE Systems’ (BAESY - Free Report) short takeoff and vertical landing experience, and air systems sustainment supported the jet’s combat capabilities.  On the other hand, Pratt & Whitney, a unit of Raytheon Technologies (RTX - Free Report) , offered its combat proven engine to this jet.

These features have enabled F-35 jet to dominate the combat aircraft market buoyed by solid demand as evident from the program’s frequent contract wins, both from Pentagon and other U.S. allies. For instance, this January, Lockheed clinched a reimbursable contract worth $1.93 billion for providing a consortium of services involving the F-35 program.

Notably, the company’s Aeronautics unit witnessed 17% year-over-year top-line growth in the second quarter of 2020, with the F-35 program being the prime contributor and 25 F-35 jets being delivered during the quarter. Considering the latest contract win and a handful of others in recent times, we expect this business segment to deliver an impressive performance in the coming days.

Growth Prospects

With rising socio-political insecurity, we expect demand for renowned combat proven jets like F-35 to increase over time.

Over the long run, production of F-35 jets is expected to continue steadily, given the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps and Navy. Consequently, we expect Lockheed to witness more order inflows for F-35, which in turn should bolster this defense contractor’s top line.

Price Performance & Zacks Rank

Lockheed Martin’s stock has gained 0.2% in the past year against the industry’s decline of 36.3%.

 

The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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