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Lockheed Martin (LMT) Wins $97M Deal to Modify F-35 Jets

Zacks Equity Research
·3-min read

Lockheed Martin Corp.’s LMT business unit, Aeronautics, recently clinched a modification contract involving the F-35 Joint Strike Fighter program. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $96.5 million, the contract is expected to get completed by December 2021. Per the terms, Lockheed will offer services associated with aircraft modification efforts for the F-35 program, which includes reach-back engineering services, support for depots, laser shock peening site support and material support depot site support.

Majority of the work related to this deal will be executed in Nagoya, Japan; Fort Worth, TX and Cameri, Italy.

Rise in Demand Aids F-35 Program

The rise in global terrorism and adverse geopolitical situations has increased the need for enhancing the nation's defense budget, a major portion of which is allocated to combat aircraft. The F-35 program has been supported by an international team of leading aerospace majors, such as Northrop Grumman NOC, BAE Systems BAESY and Pratt & Whitney, a unit of Raytheon Technologies RTX. Notably, Northrop Grumman rendered its expertise in carrier aircraft and low-observable stealth technology to this program. Also, BAE Systems’ short takeoff and vertical landing experience, and air systems sustainment supported the jet’s combat capabilities. Pratt & Whitney offered its combat-proven engine to this jet.

Such features have enabled the F-35 jet to dominate the combat aircraft market, buoyed by solid demand as evident from the program’s frequent contract wins, both from Pentagon and other U.S. allies. The latest contract win is a bright example of that.

Growth Prospects

Lockheed’s Aeronautics unit successfully delivered 31 F-35 jets during the third quarter of 2020. Considering its growing global stature, we expect this business segment to consistently perform such impressive delivery in the coming days as well.

Moreover, the production of F-35 jets is expected to continue for many years, given the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps and Navy. Consequently, we expect Lockheed Martin to witness more order inflows for F-35, like the latest one, which in turn should bolster this defense contractor’s top line.

Price Movement and Zacks Rank

Shares of this Zacks Rank #3 (Hold) company have lost 9.9% in the past year compared with the industry’s decline of 26.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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