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Lockheed (LMT) Wins $663M Deal to Aid F-35 Fighter Jet Program

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Lockheed Martin Corporation (LMT - Free Report) recently secured a modification contract for its F-35 Lightning II aircraft. The award has been given by Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $663.1 million, the contract is expected to be completed by June 2027. Per this deal, Lockheed will provide recurring logistics support to aid the F-35 Lightning II Joint Strike Fighter Air Systems’ sustainment efforts.

These logistics support includes ground maintenance activities, action request resolution, depot activation activities, automatic logistics information system operations and maintenance, reliability, and maintainability, supply-chain management, pilot and maintainer training, and training system sustainment.

A major portion of work related to this deal will be executed in Fort Worth, TX.

Significance of F-35 Jets

F-35 is the most lethal, survivable and connected fighter jet in the world. It has the ability to securely connect high-tech platforms to share information across every domain, air, land, sea, space and cyber. Such remarkable features of this fighter jet must have been ushering in solid contract wins for LMT, like the latest one. Consequently, the F-35 program remains a major revenue contributor for the United States’ largest defense contractor.

Evidently, the F-35 program was the largest revenue generator for Lockheed’s Aeronautics business unit, accounting for 64% of the segment’s net sales in 2023. Lockheed has delivered 992 F-35 airplanes since the program's inception, with 373 jets in the backlog as of Dec 31, 2023.  

Looking ahead, LMT expects to deliver 147-153 jets in 2024, and 156 jets in 2025 and beyond. Successful delivery of F-35 jets in due time, along with the recent agreement, should significantly bolster its revenues in the coming quarters.

Growth Prospects

Amid the geopolitical tensions prevalent across the globe, nations are rapidly augmenting defense purchases to strengthen their warfare capabilities. This has led to an increased demand for fighter jets, which form an integral part of a country’s defense products. Per a report by Mordor Intelligence firm, the global military aviation market is estimated to grow at a CAGR of 5.23% during 2024-2030.

Such projections indicate immense growth opportunities for prominent combat jet manufacturers like Lockheed. The company’s fighter jet portfolio includes C-130 Super Hercules, F-16 Fighting Falcon jet and F-16 Fighting Falcon, in addition to F-35 jets.

Coming to the company’s recent achievements, on Feb 21, 2024, Lockheed delivered the first C-130J-30 Super Hercules tactical airlifters with Block 8.1 upgrade to Royal Norwegian Air Force. On Jan 29, 2024, Czech Republic government signed a Letter of Offer and Acceptance to procure 24 5th Generation F-35 Lightning II aircraft.

Peer Opportunities

A few other defense players that can gain from the expanding military aviation market are Airbus SE (EADSY - Free Report) , Textron (TXT - Free Report) and Northrop Grumman (NOC - Free Report) .   

Airbus’ military aircraft consists of A400M, C295 tactical transporter, the new-generation A330 Multi Role Tanker Transport and Eurofighter, the most advanced swing-role fighter ever conceived. During 2023, 61% of the Defence and Space segment’s revenues came from military air systems.

EADSY boasts a long-term (three-to-five years) earnings growth rate of 12.4%. The Zacks Consensus Estimate for Airbus’ 2024 sales indicates an improvement of 9.5% from that reported in 2023.

Textron’s military aircraft includes Beechcraft T-6 training aircraft and Beechcraft AT-6 light-attack aircraft. The company also manufactures Beechcraft Model 18 light bomber, T-44 and T-34 training aircraft and T-1A jet trainer.

TXT boasts a long-term earnings growth rate of 11.7%. The Zacks Consensus Estimate for Textron’s 2024 sales indicates an improvement of 7% from that reported in 2023.

Northrop Grumman has been a pioneer in the development of manned aircraft. From fighter jets and stealth bombers to surveillance and electronic warfare, it has been providing manned solutions to customers worldwide. The company has built some of the world’s most advanced aircraft, ranging from the innovative B-2 Spirit stealth bomber to the game-changing E-2D Advanced Hawkeye. The significant awards in 2023 won by NOC included $2.1 billion for F-35 programs, $1.7 billion for E-2 and $1.5 billion for Triton.

NOC boasts a long-term earnings growth rate of 10.1%. The Zacks Consensus Estimate for Northrop Grumman’s 2024 sales indicates an improvement of 4.5% from that reported in 2023.

Price Performance

In the past month, shares of LMT have gained 1.1% compared with the industry’s 0.4% growth.

Zacks Investment Research
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Zacks Rank

Lockheed Martin currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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