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Lockheed Wins $750M Defense Deal for Spare Parts Supply
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Lockheed Martin Corp. (LMT - Free Report) secured a contract for providing flight line spare parts. Work related to this deal will be executed in Georgia, Oklahoma and Utah.
Valued at $750 million, this is a five-year base contract with a three-year and a two-year option period. Lockheed Martin will complete work under this agreement utilizing fiscal 2017 through 2022 defense working capital funds and expects to finish the project by Mar 31, 2022. The contract was awarded by the Defense Logistics Agency Aviation, Richmond, VA.
A Brief Note on Lockheed Martin
Being Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from a large number of foreign allies of the nation.
Lockheed Martin’s Global Supply Chain Services (GSCS) offers hardware replacements for both structural and consumable parts as well as a certified vendor program. In fact, GSCS has been providing aircraft tires to all Navy and Marine Corps aviation activities worldwide for over 10 years. Within this period, the company’s performance has included a 100% fill rate and on-time global delivery of 98.4%, resulting in a 400% reduction in retail inventories for Navy and Marine Corps activities within the continental U.S.
Under various programs, GSCS provides crucial support to the three U.S. Air Force depots by maintaining a ready and constant supply of miscellaneous, small consumable parts in more than 295,000 parts bins with 90,000 unique line items at a bin fill rate of over 99.78%. In terms of international business as well, GSCS provides support services to 55 international and commercial customers, with over 40 years of experience.
Our View
Lockheed Martin ended 2016 on an outstanding note, with its fourth-quarter results comfortably beating the Zacks Consensus Estimate on both the top and the bottom-line front. Further, the company’s year-end backlog worth $96.2 billion rose 3.6% from the year-ago number, indicating increased demand for its products from both domestic and international customers. With respect to the cash deployment strategy, the company has been successful in returning 100% of its free cash flow to stockholders in 2016, through its competitive dividend and ongoing share repurchase activity.
Going forward, we expect Lockheed Martin to carry on with this trend of outperformance in the upcoming quarters as well. The aforementioned contract win adds further impetus to this expectation. Moreover, the company’s anticipation to generate more than $5.7 billion in cash from operations during 2017, as against $5.2 billion at 2016-end, buoys optimism.
However, year to date, Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry, with the company’s gain of 7.1% being lower than the industry’s addition of 10.3%. This might have been triggered by intense competition from some of the largest defense primes in the U.S.; particularly The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have come down by 3 cents over the past 60 days, which reflects investors’ reluctance to consider the stock as a suitable investment option.
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Lockheed Wins $750M Defense Deal for Spare Parts Supply
Lockheed Martin Corp. (LMT - Free Report) secured a contract for providing flight line spare parts. Work related to this deal will be executed in Georgia, Oklahoma and Utah.
Valued at $750 million, this is a five-year base contract with a three-year and a two-year option period. Lockheed Martin will complete work under this agreement utilizing fiscal 2017 through 2022 defense working capital funds and expects to finish the project by Mar 31, 2022. The contract was awarded by the Defense Logistics Agency Aviation, Richmond, VA.
A Brief Note on Lockheed Martin
Being Pentagon’s prime contractor, Lockheed Martin offers a diverse portfolio of global aerospace, defense, security and advanced technologies. Its leveraged presence in the Army, Air Force, Navy and IT programs guarantees a steady inflow of follow-on orders, not only from the U.S. government but also from a large number of foreign allies of the nation.
Lockheed Martin’s Global Supply Chain Services (GSCS) offers hardware replacements for both structural and consumable parts as well as a certified vendor program. In fact, GSCS has been providing aircraft tires to all Navy and Marine Corps aviation activities worldwide for over 10 years. Within this period, the company’s performance has included a 100% fill rate and on-time global delivery of 98.4%, resulting in a 400% reduction in retail inventories for Navy and Marine Corps activities within the continental U.S.
Under various programs, GSCS provides crucial support to the three U.S. Air Force depots by maintaining a ready and constant supply of miscellaneous, small consumable parts in more than 295,000 parts bins with 90,000 unique line items at a bin fill rate of over 99.78%. In terms of international business as well, GSCS provides support services to 55 international and commercial customers, with over 40 years of experience.
Our View
Lockheed Martin ended 2016 on an outstanding note, with its fourth-quarter results comfortably beating the Zacks Consensus Estimate on both the top and the bottom-line front. Further, the company’s year-end backlog worth $96.2 billion rose 3.6% from the year-ago number, indicating increased demand for its products from both domestic and international customers. With respect to the cash deployment strategy, the company has been successful in returning 100% of its free cash flow to stockholders in 2016, through its competitive dividend and ongoing share repurchase activity.
Going forward, we expect Lockheed Martin to carry on with this trend of outperformance in the upcoming quarters as well. The aforementioned contract win adds further impetus to this expectation. Moreover, the company’s anticipation to generate more than $5.7 billion in cash from operations during 2017, as against $5.2 billion at 2016-end, buoys optimism.
However, year to date, Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry, with the company’s gain of 7.1% being lower than the industry’s addition of 10.3%. This might have been triggered by intense competition from some of the largest defense primes in the U.S.; particularly The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have come down by 3 cents over the past 60 days, which reflects investors’ reluctance to consider the stock as a suitable investment option.
Zacks Rank
Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>