Lockheed Martin to Provide F-22 Sustainment Services for $7B

Lockheed Martin Corp.’s LMT Aeronautics business division recently secured a contract for offering comprehensive F-22 air vehicle sustainment.  Work related to this deal is scheduled to get over by Dec 31, 2027.

Details of the Deal

Valued at $7 billion, this contract was awarded by the Air Force Life Cycle Management Center, Hill Air Force Base, UH. The deal includes five-year base ordering period. Fiscal 2018 operations and maintenance funds will be used to partially finance the task.

Work will be performed at five operational bases and six support locations situated across various parts of the United States as well as overseas locations, combat deployment and enroute support bases, potential locations through depot partnering agreements, and system program office locations.

A Brief Note on F-22

Lockheed Martin’s F-22 Raptor is the fifth-generation, single-seat, twin-engine, all-weather stealth tactical fighter aircraft with a unique combination of stealth, speed, agility and situational awareness along with lethal long-range air-to-air and air-to-ground weaponry.

However, high development costs, ban on exports and development of the more versatile F-35 aircraft led to the discontinuation of F-22 production few years back. Nevertheless, the company’s F-22 team remains committed to provide full support for Follow-on Agile Sustainment, a comprehensive weapons management program. This award-winning performance-based logistics contract offers a highly integrated F-22 support system.

What's Favoring Lockheed Martin?

Of late, there has been a rapid increase in terrorist activities across the globe. With radical institutions having an easy access to weapons and North Korea consistently sending missile threats to the continental regions of the United States, America is leaving no stone unturned to develop  tactical weaponries base.

Pentagon being the prime defense contractor, Lockheed Martin enjoys a lion’s share of the aerospace-defense industry in the United States. Naturally, the number of contracts it wins from Pentagon is also noteworthy. Moreover, the recent budgetary amendments in the country have favored defense giants like Lockheed Martin, General Dynamics Corp GD, Northrop Grumman Corp. NOC and The Boeing Company BA, among others.

In particular, in September 2017, the U.S. Senate approved the National Defense Authorization Act for fiscal 2018, worth $700 billion, include funding for various defense programs. This has been a primary factor which is expected to rake in more orders for the defense majors in the long run.

During the third-quarter earnings call, Lockheed Martin’s management increased outlook for 2017 profit for Aeronautics, Space Systems and Missiles and Fire Control by $35 million, reflecting both improved performance and higher volumes. We believe significant contract wins like the latest one will substantially help the company achieve this increased profit target.

Price Performance

Lockheed Martin’s stock has returned 25.4% in last 12 months, underperforming the 42.8% rally of the industry it belongs to. This underperformance was mostly led by intense competition that the company faces in the domestic and international markets.

 

Zacks Rank

Lockheed Martin currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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