The largest defense contractor in the U.S., Lockheed Martin Corporation LMT won three contracts in a row on Jun 25, 2015, under its three different segments from the U.S. Department of Defense (DoD).
The largest contract was clinched by the Aeronautics business for delivery of initial spares in support of low-rate initial production Lot 9 F-35 Lightning II aircraft for the Air Force, Navy, non-U.S. DoD participants and foreign military sales customers. The contract has a ceiling value of $237.8 million. Spares that are required to be produced include F-35 common spares (F-35A, B, and C variant unique spares), aloft spare packages and deployment spare packages. The contract is expected to be completed in Jun 2017.
The company expects growth in 2016 to be primarily led by the F-35 program. The F-35 – Lockheed Martin’s prime program – comprised about 19% of total sales in the first quarter of 2015. Although the F-35 program faced technical engine related issues in 2014, management expects margins on production contracts to increase at least 100 basis points in 2015.
The second contract in terms of value came in at $9.9 million which is primarily a modification contract for an equitable adjustment to the security hardware, associated software, equipment installation, system test, accreditation, certification and delivery of nuclear weapon security system equipment. The expected delivery is slated for Nov 2017.
Worth nearly $8 million, the final contract from yesterday’s funding list was secured by Lockheed Martin’s Mission Systems and Training segment. The contract was placed for Surface Electronic Warfare Improvement Program (SEWIP) Block 1B3 systems. This is essentially an evolutionary acquisition program to upgrade the existing electronic warfare system through a modular and open-system approach. This contract has an option which when exercised will take the total value to $58.9 million. The contract is expected to be concluded by Jan 2017.
At the end of first-quarter 2015 (ending Mar 29, 2015), 32.9% of Lockheed Martin’s backlog was secured by the Aeronautics unit, 23.9% by the Space Systems segment while the rest went to the other segments.
Lockheed Martin currently carries a Zacks Rank #2 (Buy). Some other well-placed stocks in the aerospace and defense space include TransDigm Group Incorporated TDG, sporting a Zacks Rank #1 (Strong Buy) and Leidos Holdings, Inc. LDOS and Northrop Grumman Corporation NOC, carrying a Zacks Rank #2.
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