Lockheed Martin Wins Three Defense Contracts Worth $626M
Defense major Lockheed Martin Corp. (LMT - Analyst Report) received three contracts from the U.S. Department of Defense worth nearly $626.3 million. The largest among the three contracts is worth $492 million, awarded by the U.S. Navy to provide non-air vehicle spares, support equipment, Autonomic Logistics Information System hardware and software upgrades, supply chain management, full mission simulators and non-recurring engineering services to support Low Rate Initial Production Lot VII F-35 Lightning II Joint Strike Fighter aircraft.
Another one worth $70 million has been awarded by the U.S. Air Force to work on extremely high frequency system needed for planning defense mission. The third, a $64.3 million contract, was awarded by the U.S. Navy for modification work on some F-35A air vehicles.
Lockheed Martin’s diverse product offerings allow it to win consistent orders from the U.S. and its allied partners. In fact, 82% of its sales in 2013 came from the U.S. government. Recently, Lockheed received a multi-billion dollar deal from the Pentagon for F-35s (read: Lockheed Martin Seals $4.7B Deal for 8th Batch of F-35s).
However, the Obama administration is shaking up its defense team. The resignation of the U.S. Defense Secretary Chuck Hagel, a likely revision of outlook on Afghanistan and rising threat from the Islamic State (“IS”) in Iraq and Syria might see an increase in U.S. defense expenditure
(read: Defense Stocks in Focus Following Hagel's Exit Amid Crisis).
The Republican win in the mid-term election could see higher defense spending, as historically they’ve been critical of defense budget cuts. This should benefit the defense majors like Lockheed Martin, Northrop Grumman Corporation (NOC -Analyst Report), Raytheon Co. (RTN - Analyst Report) and Boeing Company (BA -Analyst Report) among others.
Lockheed Martin currently has a Zacks Rank #3 (Hold).
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Military sales like these have helped the U.S. economy grow at an annual rate of 3.5 percent in the July-September quarter. This along with solid gains in business investment, export sales, and the biggest jump in military spending in five years.