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Lockheed Martin Wins $87M Deal to Support Iraq's C-130J Jets

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Lockheed Martin Corp.’s (LMT - Free Report) Aeronautics business unit recently won an $86.8 million five-year contact to support the Iraqi Air Force’s fleet of C-130J aircraft. The contract was awarded by the Air Force Life Cycle Management, Robins Air Force Base, GA.

Details of the Deal

Per the terms of the deal, Lockheed Martin will provide support services to the Iraqi Air Force that includes contractor logistics support, technical assistance, aircraft and aerospace ground equipment, spares, repairs, and familiarization training on their existing six C-130J aircraft.

Work related to the deal will be performed at Martyr Mohammed Ala Air Base, Iraq and is expected to get completed by Jun 30, 2022. Lockheed Martin will utilize foreign military sales funds for completing the tasks. The deal comes with a ceiling value of $100 million.

Benefits of the C-130J Hercules Aircraft

The C–130J Hercules is a medium-sized tactical transport airlift aircraft that is capable of performing a variety of combat delivery (tactical airlift) operations across a broad range of mission environments. These include the deployment and redeployment of troops, supplies within command areas in a theater of operation, aero-medical evacuation, air logistics support and augmentation of strategic airlift forces. The C-130J aircraft, with its extended fuselage, provides additional cargo carrying capacity for the Air Force combat delivery mission compared to the legacy C-130E/H and the C-130J (short) aircraft.

What’s Favoring Lockheed Martin?

Lockheed Martin's Aeronautics division remains focused on upgrading and providing enhanced support services for its legacy C-130 Hercules fleet, worldwide. In 2017, Lockheed Martin delivered 26 C-130J aircraft, of which seven were international deliveries. As of Dec 31, 2017, the company had 64 of these tactical aircraft in its backlog, a number we believe will increase in the coming days, courtesy of the latest contract clinched by the company.

The Aeronautics division successfully delivered the 400th C-130J Super Hercules aircraft in the first quarter of 2018. Further, the overall performance of the C-130J program has been continuing to draw global demand with operators in 18 countries. Inevitably, we can expect the Aeronautics division to secure more similar contracts involving its C-130J jets in the days ahead.

Furthermore, the recently approved fiscal 2019 defense budget includes a spending plan of $21.7 billion on aircraft. The budget proposal hints at a prospective increase in Lockheed Martin’s C-130J transport aircraft program that has been allotted $1.57 billion.

Moreover, the 2018 Appropriations Act supported increased funding for 17 additional C-130J aircraft. These developments reflect solid growth prospects for Lockheed Martin’s C-130J program going ahead, which, in turn, are likely to boost the company’s profit margin.

Price Movement    

Lockheed Martin’s stock has improved about 5.3% in the last year compared with the industry’s growth of 27.4%. The underperformance may have been caused by the intense competition that the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically as well as internationally.

Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Northrop Grumman (NOC - Free Report) , Textron (TXT - Free Report) and Wesco Aircraft Holdings (WAIR - Free Report) .

While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Textron and Wesco Aircraft Holdings carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 6.24% to $16.50 in the last 90 days.

Textron came up with an average positive earnings surprise of 16.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 2.94% to $3.15 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

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