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Lockheed (LMT) Wins $585M Deal to Aid F-35 Aircraft Program

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently clinched a modification contract to support the F-35 aircraft. The award has been offered by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $584.8 million, the contract is scheduled to be completed by April 2026. Per the terms, Lockheed will provide system integration engineering for the development of new ASQ-239 electronic warfare/counter measure hardware to support the F-35 aircraft.

The contract will serve the U.S. Air Force, Marine Corps, Navy, and non-U.S. Department of Defense (DoD). The majority of the work related to the contract will be executed in Nashua, NH.

Benefits of the Deal

Supported by an international team of leading aerospace majors, F-35 enjoys a strong global presence, with the program having eight international partners, including Italy, Australia, Norway, Denmark, and Canada. Additionally, it has six foreign military sales customers that are procuring and operating the F-35 namely Israel, Japan, South Korea, Poland, Belgium, and Singapore. This surely demonstrates the huge demand that this jet program enjoys worldwide.
However, the F-35 program has been facing some criticisms lately with experts arguing that this jet is the most expensive weapon system ever built. In fact, in February, the U.S. Air Force also admitted the exuberant price of this fleet. It is imperative to mention here that in association with Pentagon, Lockheed has been trying to cut down F-35’s cost for the past few years.

Per a report by Forbes, in October 2019, Pentagon and Lockheed reached an agreement to reduce the unit cost of all three variants of F-35 by an average of 12.7% across three production lots. We believe the latest contract awarded to Lockheed will put this jet maker a step ahead toward further reduction of F-35’s cost while also boosting the fleet’s future sustainment.

Growth Prospects

Per a Research and Markets report, the global combat aircraft market is expected to witness a CAGR of 4% during the 2020-2025 time period. 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 combat jet manufacturers like Northrop Grumman NOC, Boeing BA and Textron TXT.

Since its inception, Northrop Grumman has been a pioneer in the development of manned aircraft for combat. Northrop Grumman 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 that enable warfighters to accomplish missions anytime, anywhere and under any conditions.

Northrop Grumman reported third-quarter 2021 earnings of $6.63 per share, which surpassed the Zacks Consensus Estimate of $5.93 by 11.8%. NOC stock has gained 15.2% in the past year.

Boeing’s Defense, Space & Security segment’s primary products include fixed-wing military aircraft, F/A-18E/F Super Hornet, F-15 programs, P-8 programs, KC-46A Tanker, and T-7A Red Hawk. This segment also produces rotorcraft and rotary-wing programs, such as CH-47 Chinook, AH-64 Apache, and V-22 Osprey.

Boeing incurred an adjusted loss of 60 cents per share in third-quarter 2021, which came in much wider than the Zacks Consensus Estimate of a loss of 17 cents. BA stock has risen 1.2% in the past year.

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 Beechcraft T-6C trainer and AT-6 Wolverine.

Textron reported third-quarter 2021 adjusted earnings of 85 cents per share, which exceeded the Zacks Consensus Estimate of 75 cents by 13.3%. TXT stock has gained 62.1% in the past year.

Price Movement and Zacks Rank

Shares of Lockheed Martin have lost 7.9% in the past year compared with the industry's decline of 28.7%.

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
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