Lockheed Martin Corp. (LMT - Free Report) recently clinched a modification contract for procuring support equipment in relation to the low-rate initial production of F-35 jets’ 11th lot. Work related to the deal is scheduled to be over by September 2023.
Details of the Deal
Valued at $315.8 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Majority of the work will be performed in Orlando, FL; Redondo Beach, CA; Fort Worth, TX and Hartford, CT.
The contract will cater to the U.S. Air Force, Marine Corps, Navy and non-Department of Defense (DoD) participants. Notably, fiscal 2016 and 2017 aircraft procurement (Air Force); fiscal 2017 and 2018 aircraft procurement (Navy); fiscal 2018 aircraft procurement (Marine Corps); and non-DoD Participant funds will be utilized to complete the task.
A Brief Note on F-35
F-35 Lightning is a supersonic, multi-role fighter jet, which represents a quantum leap in air-dominance capability offering enhanced lethality and survivability in hostile, anti-access airspace environments. Its advanced stealth allows pilots to enter areas without being detected by enemy radars. Currently, these jets are being used by defense forces of the United States and 11 other nations across the globe, courtesy of its advanced stealth, integrated avionics, sensor fusion, superior logistics support and powerful integrated sensors capabilities.
With Lockheed Martin being the primary partner, the F-35 program has been supported by an international team of leading aerospace majors like Northrop Grumman Corp. (NOC - Free Report) , BAE Systems (BAESY - Free Report) and Pratt & Whitney — an unit of United Technologies (UTX - Free Report) .
Rising socio-political uncertainties worldwide has prompted nations to expand their military arsenals at an exponential rate over the last decade. This, in turn, has been boosting the prospects of U.S. defense contractors, with the United States being the largest exporter of military weaponries worldwide. At present, Lockheed Martin is the Pentagon’s largest defense contractor and thus enjoys a constant inflow of contracts for its varied defense programs from the Pentagon as well as its foreign allies.
The F-35 program, being Lockheed Martin’s largest program, generated 27% of its total consolidated net sales in second-quarter 2018. The company’s Aeronautics division also realized solid year-over-year revenue growth of 8.1%, primarily driven by higher net sales of approximately $370 million from the F-35 program. Considering the latest contract win supporting the low-rate initial production (LRIP) of the 11th lot, we may expect the Aeronautics unit to deliver similar solid performance in the upcoming quarters as well.
Moreover, the production of F-35 is expected to increase in the years ahead, given the U.S. government’s current inventory objective of 2,456 aircraft for the Air Force, Marine Corps and Navy along with commitments from Lockheed Martin’s current eight international partners, overseas customers and rising global demand.
Also, the fiscal 2019 defense budget, which was approved by the U.S. Senate in June 2018, provisioned for an investment of $21.7 billion on aircraft. This financial plan includes an allotment of $10.7 billion and additional funding for the procurement of 97 Lockheed Martin’s F-35 Joint Strike Fighters as well. Going ahead, these projections and recent developments reflect solid growth prospects for Lockheed Martin’s F-35 program, which, in turn, are likely to drive the company’s profit margin.
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