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Lockheed (LMT) Wins Contract to Support F-16 Aircraft

Lockheed Martin Corp. LMT clinched a modification contract involving F-16 fighter aircraft. The award has been offered by the 338th Enterprise Sourcing Squadron, Joint Base San Antonio-Randolph, TX.

Details of the Deal

Valued at $74 million, the contract is projected to be completed by Mar 21, 2026. Per the terms of the deal, Lockheed will offer operational training capability for F-16 Block 70/72, F-16 upgrades and F-16V models.

Work related to this deal will be executed in Orlando, FL, and several locations outside the continental United States. The contract involves Foreign Military Sales.

Importance of the F-16 Jets

Over the past decade, a rapid rise in global terrorism and adverse geopolitical situations across borders have boosted the demand for defense products. Combat aircraft constitute a major portion of this portfolio. It is imperative to mention here that the F-16 Falcon jets have significantly risen in importance on a global scale over the past few years.

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For the past couple of years, the F-16 has witnessed a significant development, with nations like Taiwan, Bulgaria, Morocco and Bahrain signing agreements to procure new F-16 aircraft.

In order to make the most of this rising demand, Lockheed introduced F-16 Block 70/72 in 2020, the most advanced F-16 aircraft, combining numerous capabilities and structural upgrades. This model provides a new aircraft structure that lasts 50% longer than the previous F-16 version.

Such advancements might have been ushering in contracts from Pentagon and other U.S. allies, like the latest one, thereby boosting Lockheed’s revenue prospects.

Growth Prospects

With rising security threats across the globe, emerging economies like the Asia Pacific, the Middle East and South America are spending a lot on enhancing their defense arsenals. Meanwhile, other nations like Europe and the United States have already been leading the defense market. With the United States being the largest weapons exporter worldwide, the nation has been spending significantly on defense products, including combat aircraft.

Lockheed, being a prominent combat aircraft manufacturer in the United States, enjoys a dominant position in the combat aircraft market.

Per a Mordor Intelligence report, the global fighter aircraft market is expected to witness a CAGR of 3.95% during 2023-2028, with North America constituting the largest share of this market.

Such growth can be attributed to a rise in global threats and geopolitical instabilities, and increased spending on defense. These projections should benefit Lockheed, along with other U.S.-based combat jet manufacturers like Boeing BA, Northrop Grumman NOC and Textron TXT.

Boeing’s Defense, Space & Security segment engages in the research, development, production and modification of manned and unmanned military aircraft. This segment's primary products include military aircraft like F/A-18E/F Super Hornet, F-15, P-8, KC-46A Tanker and T-7A Red Hawk aircraft.

BA has a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for 2023 sales implies a 18% increase from the 2022 reported figure.

Since its inception, Northrop Grumman has been a pioneer in the development of manned combat aircraft. The company also has a tradition of providing technological leadership in all aspects of military aviation and aircraft, such as manned, unmanned, targeting, surveillance and aircraft self-protection systems. This helps warfighters in accomplishing missions anytime, anywhere and under any conditions.

NOC boasts a long-term earnings growth rate of 3.8%. The Zacks Consensus Estimate for 2023 sales indicates a 4.7% increase from the previous year’s reported number.

Textron’s business unit, Textron Aviation Defense designs, builds and supports versatile and globally-known military aircraft, preferred for training and attack missions. Some of Textron’s renowned products include the Beechcraft T-6C trainer and AT-6 Wolverine.

TXT has a long-term earnings growth rate of 11.2%. The Zacks Consensus Estimate for 2023 sales indicates a 7.2% increase from the year-ago reported figure.

Price Movement and Zacks Rank

Shares of Lockheed have rallied 8.5% in the past year compared to the industry's 4.4% growth.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Boeing Company (BA) : Free Stock Analysis Report

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

Northrop Grumman Corporation (NOC) : Free Stock Analysis Report

Textron Inc. (TXT) : Free Stock Analysis Report

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