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Lockheed Martin Corp. ( LMT - Analyst Report) was able to seal two contracts from the U.S. Department of Defense (DoD) on Sep 13, 2013.
The first contract, worth $75.7 million, is a modification to the previously awarded F-35 Lightning II Low Rate Initial Production Lot 6 (LRIP) Advance Acquisition contract. Per the recent contract, which runs through Dec 2018, the company will receive extra funding from the DoD for redesigns of certain F-35 spare parts that are at risk of supply-chain disruptions due to “diminishing manufacturing sources”.
In August, the company also received a contract worth $852.3 million from the DoD to provide the required equipment for F-35 fighter jets under Low Rate Initial Production Lot 6. This was a modification contract to an existing contract that called for Lockheed Martin to supply particular tooling and special test equipment for the U.S. Navy, U.S. Air Force and their international associates. These are critical in maintaining the current F-35 delivery schedules and meeting future production rates.
Besides the LRIP modification contract, the defense major also won a $15.2 million “un-priced letter" contract from the DoD on Sep 13. Per this contract, the company will provide long lead material required for Trident II D5 Missile production scheduled for fiscal 2014. This one runs through Sep 30, 2018.
Lockheed Martin is the largest defense contractor in the world. The company’s customer base includes the U.S. government, foreign governments and other commercial buyers.
Despite the cuts in defense spending and the threat of sequestration, the company has been able to seal many contracts from the DoD. Its better-than-expected second quarter earnings on the back of strong operational performance also drove the management to raise its full-year earnings guidance to $9.20–9.50 from $8.80–9.10.
Lockheed Martin presently retains a short-term Zacks Rank #2 (Buy). Other well-placed operators include Northrop Grumman Corp. ( NOC - Analyst Report) , Raytheon Co. ( RTN - Analyst Report) and Alliant Techsystems Inc. . While Alliant Techsystems carries a Zacks Rank #1 (Strong Buy), Northrop and Raytheon hold a Zacks Rank #2 (Buy).