Aerospace and defense major Lockheed Martin Corporation (LMT) continues to receive U.S. Department of Defense (DoD) contracts in spite of the threat of sequestration. The company recently won a contract from the National Warhead and Energetic Consortium to bring the Long Range Land Attack Projectile (LRLAP) to production.
The contract calls for Lockheed to develop production line tooling, check equipment and manufacturing process plans for the initial phase of production. The control unit will be assembled at Lockheed Martin's Ocala, FL facility, while the ultimate assembly of LRLAP will be at its Troy, AL facility.
LRLAP is an advanced new variety of GPS-guided artillery system that integrates conventional artillery guns and rocketry with existing lightweight guns. With a maximum range of over 63 nautical miles (72 miles), LRLAP is the longest-range projectile in the Navy’s history that enables the naval force to deliver 24-pound payloads well over the horizon.
Lockheed Martin – the largest defense contractor in the world – has a wide customer base comprising the U.S. government, foreign governments and other commercial buyers.
Sequestration and spending cuts were expected to adversely impact the performance of the defense behemoths that explicitly provide products and services to these defense establishments. However, the defense players seem to be doing well despite the cuts in defense budgets and big-ticket programs. Small contracts doled out by the DoD have kept alive the revenue stream of these companies.
Lockheed has, in fact, clinched a major share of DoD contracts awarded on Sep 20, 2013. Of the total $4.95 billion worth of DoD contracts, Lockheed sealed approximately 81% of the amount, comprising five modification contacts. The biggest share of these multiple contracts, with a value of $3.92 billion, would pay for the production of Terminal High Altitude Area Defense (THAAD) missiles for the U.S. armed forces and also for United Arab Emirates.
Lockheed Martin presently retains a short-term Zacks Rank #1 (Strong Buy). We are impressed by the company’s strong operational performance that drove management to raise its full-year earnings guidance to $9.20–9.50 from $8.80–9.10.
Other stocks that are also worth considering in the space include Northrop Grumman Corp. (NOC), Raytheon Co. (RTN) and Alliant Techsystems Inc. (ATK). While Alliant Techsystems carries a Zacks Rank #1 (Strong Buy), Northrop and Raytheon hold a Zacks Rank #2 (Buy).
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