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Lockheed Martin Secures $831M Deal to Support F-35 Program

Zacks Equity Research

Lockheed Martin Corp.’s LMT business division, Aeronautics, recently clinched a modification contract for production and delivery of 14 F-35A aircraft from the 15th lot. The deal has been awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Valued at $831 million, the contract is expected to be completed by March 2023. Per the terms of the deal, the company will also offer associated red gear to support the Government of Australia. Majority of the task will be carried out in Fort Worth, TX.

Importance of F-35 in the Fighter Jet Market

With increased cross-border tensions gripping varied nations across the globe, both developed and developing nations have been ramping up their defense arsenal over the past decade. Notably, military jets comprise major part of the weapon portfolio. Currently, Lockheed Martin’s supersonic, multi-role fighter jet, F-35, is being used by the defense forces of the United States and 11 other nations.

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According to Forecast International, a total of 3,401 fighter aircraft are expected to be produced from 2019 through 2028. Notably, the total number of fighters to be produced over the next decade is 17.2% higher than the number of aircraft produced during the previous 10 years. F-35 is anticipated to be the largest fighter program over the next decade.

Of the nearly 3,400 fighters expected to enter the production lines during the next 10 years, 1,548 jets are projected to be F-35s, representing 45.5% of the market. This clearly highlights the importance of the F-35 program in the global fighter jet market.

What Favors Lockheed Martin?

The F-35 is Lockheed Martin’s largest program that generates more than 25% of its total sales. Last year, the program fueled annual revenue growth by 19.6% at the company’s Aeronautics division. Keeping up with this trend, we may expect the latest contract win to help the Aeronautics unit deliver similar or even better performance in the upcoming quarters.

Taking into account the F-35 program’s solid estimated production rate, as mentioned above, the latest contract win should further provide a boost to this program in the coming days.

Such developments reflect solid prospects for Lockheed Martin’s F-35 program, which are likely to boost the company’s profit margin.

Price Movement

In a year’s time, shares of Lockheed Martin have gained 32.9% compared with the industry’s 20.3% growth.

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, L3Harris Technologies Inc LHX and Leidos Holdings LDOS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northrop Grumman has recorded an average positive earnings surprise of 11.48% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen by 3.8% to $20.38 over the past 90 days.

L3Harris Technologies has recorded an average positive earnings surprise of 5.02% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen by 7.5% to $9.99 over the past 90 days.

Leidos Holdings has recorded an average positive earnings surprise of 8.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen by 4.6% to $4.96 over the past 60 days.

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