Defense contractor, Lockheed Martin Corporation (LMT) has received a contract worth $7.4 billion from the Department of Defense (“DoD”) for system upgrade of the Air Force's F-22 Raptor fighter jet.
Under the deal, Lockheed Martin will be asked to work on a variety of tasks that include developing upgrades, incorporating new requirements, adding capabilities and improving the performance of the F-22 weapon system.
The F-22 Raptor is a single-seat, twin-engine, fifth-generation super maneuverable fighter aircraft that uses stealth technology. Lockheed Martin is the prime contractor and is responsible for the majority of the airframe, weapon systems and final assembly of the F-22. Its program partner, Boeing Defense, Space & Security, a segment of The Boeing Company (BA), provides wings, aft fuselage, avionics integration, and training systems.
Earlier in 2011, the Air Force had temporarily stopped the work of its entire fleet of Raptors for more than four months due to problems with regard to its oxygen-supply system. However, in September, it returned its Raptors back to flight.
Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. Going forward, we believe Lockheed Martin has significant upside potential based on the Obama administration’s focus on Intelligence Surveillance Reconnaissance, unmanned systems, force protection, cyber security, and missile defense.
However, these positives are dampened by defense budget cuts, headwinds in margins, higher pension liability and risk regarding retrenchment cost recovery. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
In October this year, Lockheed Martin showed resilience, reporting strong third quarter fiscal 2011 operating earnings of $1.99 per share. The quarter’s results sailed past both the Zacks Consensus Estimate of $1.81 and year-ago earnings of $1.53 per share.
Based in Bethesda, Maryland, Lockheed Martin is a global security company that is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
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