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LMT Wins Billion Dollar DoD Contract

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Aerospace and defense major Lockheed Martin Corp. (LMT - Free Report) has been able to clinch a major share of Department of Defense (DoD) contracts awarded on Sep 20, 2013. Of the total $4.95 billion worth of DoD contracts, Lockheed sealed approximately 81% of the amount, comprising five modification contacts.

The biggest share of these multiple contracts, with a value of $3.92 billion, would pay for the production of Terminal High Altitude Area Defense (THAAD) missiles for the U.S. armed forces and also for United Arab Emirates. The contract definitizes Lot 4 production as well as includes a priced option for Lot 5.

The THAAD system is used to shoot down short, medium, and intermediate ballistic missiles in their terminal phase using a hit-to-kill approach. It is the only missile defense system with the operational flexibility to intercept in both the endo- and exo-atmospheres thus providing versatile capability to the warfighter.  

The largest defense contractor in the world, Lockheed’s customer base includes the U.S. government, foreign governments, and other commercial buyers. The company provides sustainment and logistic services in support of fire control and tactical missile programs. THAAD is one of the company’s core programs.

Apart from this big win, Lockheed has also received a $46 million modification contract to the previously awarded F-35 Lightning II low rate initial production Lot VI advance acquisition contract. The deal facilitates non-recurring technical work required to support production operation on the F-35 Joint Strike Fighter.

The other three contracts comprised $24.8 million for technical upgrades on the computer operating system that runs the Air Force F-22 Raptor fighter jet training systems; $20.5 million for securing electronic components needed for F-35 production and sustainment; and finally $10.8 million to give initial non-prime mission equipment and interim technical support for the F-35 Joint Strike Fighter United States Reprogramming Laboratory.

Despite the cuts in defense spending and the threat of sequestration, the company has successfully won numerous 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.

Over the last 60 days, the Zacks Consensus Estimate for 2013 improved 5.1% to $9.48 per share with 13 out of 14 estimates moving upward. For 2014, 12 out of 16 estimates were also revised higher over the same time frame, lifting the Zacks Consensus Estimate by 6.9% to $9.60 per share.

Lockheed Martin presently retains a short-term Zacks Rank #1 (Strong Buy). Other stocks that are also worth considering in the space include Northrop Grumman Corp. (NOC - Free Report) , Raytheon Co. (RTN - Free Report) and Alliant Techsystems Inc. . While Alliant Techsystems carries a Zacks Rank #1 (Strong Buy), Northrop and Raytheon hold a Zacks Rank #2 (Buy).

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