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).
