Lockheed Martin Corp. (LMT) received an undefinitized modification contract worth $34.5 million from the Department of Defense (DoD) on Aug 22, 2013. Per the contract, the company will provide Autonomic Logistics Information System equipment, training devices, and sustainment and logistics work. These equipment and services will be utilized by the Italian Air Force for the Low Rate Initial Production Lot 6 F-35 Lightning II Joint Strike Fighters. The contract is expected to be completed by Oct 2018.
The DoD granted a total of 17 contracts valued at more than $1.14 billion last Thursday. Though most of the contracts were given to privately held firms, there were some publicly traded companies apart from Lockheed Martin in the award list.
Computer Sciences Corp. (CSC) received an undefinitized modification contract worth $28.9 million to provide information technology services in support of the U.S. Navy Technology Services Organization. The contract runs through Aug 2014. Meanwhile, Olin Corp. (OLN) received a fixed-price, option eligible, non-multiyear modification contract worth $11.7 million for the supply of 5.56 millimeters (mm) M855 rifle cartridges in 10-round clips, 5.56mm M855 cartridges, 5.56mm M855 cartridges with M856 tracer rounds included in a 4:1 ratio, and 0.50 caliber M17 cartridges.
We know that the aerospace and defense industry is faced with budget uncertainty and sequestration. However, these defense behemoths have diversified their businesses to counter the effect of sequestration to some extent and are not lacking in DoD contracts. Recently, Lockheed Martin received a contract worth $852.3 million from the DoD to provide the required equipment for F-35 fighter jets under Low Rate Initial Production Lot 6.
We expect Lockheed Martin to register a stable performance in the long run due to a leveraged presence in the Army, Air Force, Navy and IT programs. Going forward, we believe that the company has significant upside potential based on Intelligence Surveillance Reconnaissance, unmanned systems, force protection, cyber security, and missile defense programs. The company presently retains a short-term Zacks Rank #2 (Buy). We also have Huntington Ingalls Industries, Inc. (HII) in the space with a Zacks Rank #2.
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