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Lockheed Martin's (LMT) F-35 Enhances Its Global Footprint

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Lockheed Martin Corporation (LMT - Free Report) recently revealed that two more countries have been added to its Foreign Military Sales customers in 2021 to procure and operate the F-35 jet. This reflects increased demand for stealth aircraft across the globe. With six already on the list, Switzerland and Finland take the count to eight foreign military customers by choosing F-35 as their fighter jet for military missions.

Moreover, F-35’s increased importance can be gauged by the addition of the Royal Netherlands Air Force as the ninth international program partner of F-35, proclaiming the F-35 fleet to be ready for Initial Operational Capability.

Performance of F-35 Boosts Growth

The F-35 aircraft is one of the most dependable aircraft for many nations across the globe augmented by its strong operational performance. The fighter jet has proven its excellent operational capability by delivering more than 80% mission-capable rates. Moreover, 93% of its parts have recorded better-than-expected performance.

Lockheed Martin’s efforts to transform the jet by employing advanced digital technologies further enhance the warfare capability of the jet and attract nations to include this stealth aircraft in their fleet. The increased demand for the aircraft enabled Lockheed Martin to deliver 142 F-35 jets in 2021, thereby surpassing its year-end target of 133-139 jets.

The company also demonstrated its F-35 fleet efficiency by making it part of four base and ship activation programs while participating in more than 60 deployments and detachments. Also, in U.K.'s Carrier Strike Group 2021, F-35Bs from the U.S. Marine Corps and Royal Air Force covered nearly 1,300 sorties, covering more than 2,200 hours, and efficiently conducted 44 combat missions.

The outstanding features offered by the aircraft and Lockheed Martin’s efforts to continuously make it better through various digital transformations have significantly bolstered its demand.  Currently, there are more than 750 aircraft operating from 30 bases and ships globally, while the aircraft has flown approximately 470,000 cumulative flight hours. Such an incredible demand must have bolstered the company’s revenues from the aircraft.

Due to its excellent operational capabilities, which are well-suited for any military expedition, Lockheed Martin may continue to witness a strong inflow of orders involving the aircraft from the U.S. Army as well as its foreign allies.

Benefits for Peers

Looking ahead, the production of F-35 jets is expected to continue for many years, given the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps and Navy. In this context, such upbeat prospects for the F-35 jet not only stand to benefit Lockheed but also Northrop Grumman (NOC - Free Report) and BAE Systems (BAESY - Free Report) as both are leading supporters of F-35 Joint Strike Fighters production.

Northrop Grumman is a principal member of the Lockheed Martin-led industry team for F-35. The company plays a critical role in the development, demonstration, production and sustainment of this multirole fighter, and designs and supplies components for mission systems and airframe.

BAE System provides its military aircraft expertise to the development, manufacture, integration and sustainment of the F-35. As a key partner, the company holds a 13-15% workshare of each aircraft, excluding propulsion, and plays a major role in the program across multiple markets.

In January 2020, Northrop Grumman and BAE Systems received a contract award from Lockheed Martin to enable new functionality to protect the 5th Generation F-35 Lightning II multi-role fighter. As part of a collaborative arrangement among Northrop Grumman, BAE Systems and Lockheed Martin, the three companies will integrate Northrop Grumman’s AN/ASQ-242 Integrated Communications, Navigation and Identification and BAE Systems’ AN/ASQ-239 Electronic Warfare/Countermeasures system for optimal operational utility.

This should further enhance F-35’s capabilities, thereby boosting its future demand. Looking ahead, Northrop Grumman boasts a long-term earnings growth rate of 8.9%, while BAE Systems boasts a long-term earnings growth rate of 3.6%.

Price Movement

In the past year, shares of LockheedMartin have gained 1.6% as against the industry’s fall of 30.1%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank

Lockheed Martin currently carries a Zacks Rank #3 (Hold). A better-ranked stock from the same industry is EmbraerEmpresa Brasileira de Aeronautica (ERJ - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Embraer’s third-quarter revenues were $958.1 million, up 26.3% year over year. The Zacks Consensus Estimate for Embraer’s 2021 sales indicates year-over-year growth of 19.5%.

The long-term earnings growth rate for Embraer is pegged at 17%. Shares of ERJ have returned a whopping 172.5% value to its investors in the past year.