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Lockheed Martin Wins $32M Deal to Modify F-35 Aircraft Program

Zacks Equity Research

Lockheed Martin Corp .’s LMT Aeronautics business segment recently secured a contract for procurement of modification kits and special tooling to support modification and retrofit of delivered F-35 Lightning II Joint Strike Fighter jets.  The deal has been awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Valued at $32.1 million, the contract will cater to the U.S. Air Force, Marine Corps, Navy, non-Department of Defense (DoD) participants and Foreign Military Sales (FMS) customers. Work related to the deal is scheduled to be over by June 2025. The entire task will be carried out in Fort Worth, TX.

A Brief Note on F-35 Program

The F-35 Lightning is a supersonic, multi-role fighter jet that represents a quantum leap in air-dominance capability, offering enhanced lethality and survivability in hostile, anti-access airspace environments. Currently, it is being used by the defense forces of the United States and 11 other nations, chiefly owing to its advanced stealth, integrated avionics, sensor fusion, superior logistics support and powerful integrated sensors capabilities.

What Favors Lockheed Martin?

The F-35 is Lockheed Martin’s largest program that generates more than 25% of its total sales. At the company’s Aeronautics division, the program fueled annual revenue growth by 19.6% in 2018. 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.

The production of F-35 is expected to improve 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 the company’s eight international partners and overseas customers, and rising global demand for military jets.

With 341 production aircraft in backlog as of Jun 30, 2019, and considering the aforementioned inventory of the U.S. government, we may expect the F-35 program to consistently act as a key catalyst for the company.
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 17.3% compared with the industry’s 2.4% rise.

Zacks Rank & Other Key Picks

Lockheed Martin currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space are General Dynamics Corp. GD, Leidos Holdings, Inc. LDOS and Northrop Grumman Corp. NOC, each carrying a similar rank as Lockheed Martin. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

General Dynamics delivered average positive earnings surprise of 4.85% in the last four quarters.  The Zacks Consensus Estimate for 2019 earnings has moved 0.9% up to $11.86 over the past 90 days.

Leidos Holdings delivered average positive earnings surprise of 6.51% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 2.2% to $4.68 over the past 90 days.

Northrop Grumman delivered average positive earnings surprise of 20.11% in the last four quarters.  The Zacks Consensus Estimate for 2019 earnings has moved 1.8% north to $19.63 over the past 90 days.

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