Lockheed in a Contract Wining Spree - Analyst Blog

Lockheed Martin Corp. LMT – Pentagon's No. 1 contractor – is confident of winning foreign military sales FMS contracts in spite of the difficult budgetary scenario at home. Recently, the company won a sizable contract modification to supply PATRIOT anti-aircraft missiles and related equipment to the Emirate of Kuwait. Lockheed Martin's share price inched higher by 1.7% to close at $163.24 on Mar 31.

Per this FMS contract, worth $610.9 million, Lockheed Martin will provide 92 one-pack missiles, 50 launcher modification kits and associated ground equipment, tooling, and initial spares.

Lockheed Martin received the original contract in December last year. The firm-fixed-price foreign military sales contract, worth $263.4 million, called for Lockheed Martin to supply 14 four packs of Patriot anti-aircraft missiles and 7 launcher modifications kits to the Kuwaiti military. Following the modification contract, the completion date has been moved to May 31, 2016.

The stringent budget environment has definitely raised an alarm for the defense companies. However, regular FMS contracts have helped the defense majors to withstand uncertain budgetary issues at home. Again, in January, the passing of Obama's $1.1 trillion Omnibus spending measure allows Pentagon to utilize as much as $93 billion for buying weapons and another $63 billion for advancing research and development in the sector. Hence, with gradual strengthening of the global economy and the budget issues drawing to an end, the defense majors will likely see stability in 2014.

Yesterday, the company received a $245.8 million modification cost-plus-incentive-fee to exercise the option for additional Global Positioning System III Space Vehicles 07 and 08.  The work on this contract is expected to be completed on Apr 1, 2018 for Space Vehicle 07 and Oct. 1, 2018 for Space Vehicle 08.

Recently Lockheed Martin won a chunk of department of defense (DoD) orders for $875 million in total. These comprised a $698 million fixed-price-incentive, firm target, advanced acquisition order for the procurement of long-lead parts, materials, and components required to build 57 Low-Rate Initial Production, or LRIP, Lot IX F-35 Lightning II Joint Strike Fighters.

Lockheed currently has a Zacks Rank #2 (Buy). Other well-placed players in the aerospace and defense industry include Huntington Ingalls Industries, Inc. HII, Wesco Aircraft Holdings, Inc. WAIR and General Dynamics Corp. GD. Huntington Ingalls and Wesco Aircraft carry a Zacks Rank #1 (Strong Buy) while General Dynamics holds a Zacks Rank #2 (Buy).