News

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently secured a contract involving its F-35 fighter jet program. The award has been provided by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $79 million, the contract is expected to be completed by December 2024. Per the terms of the deal, Lockheed will procure diminishing manufacturing sources of parts required for the production and sustainment of F-35 jets.

The work related to this contract will be executed in Fort Worth, TX. The award will serve the U.S. Air Force, Marine Corps, Navy, Foreign Military Sales customers and non-U.S. Department of Defense participants.

Significance of F-35 Jets

Lockheed’s F-35 is the most lethal, survivable and connected fighter jet in the world. It can securely connect high-tech platforms to share information across every domain, air, land, sea, space and cyber. The aircraft comes in three main variants, which are F-35A (conventional takeoff and landing), F-35B (short take-off and vertical landing) and F-35C (carrier-based).

Such remarkable features of this fighter jet are likely to have been ushering in solid contract wins for LMT, like the latest one. Consequently, the F-35 program remains a major revenue contributor for the United States’ largest defense contractor.

The F-35 program was the largest revenue generator for Lockheed’s Aeronautics business unit, accounting for 64% of the segment’s net sales in 2023 and 26% of LMT’s total consolidated net sales. Lockheed has delivered 992 F-35 airplanes since the program's inception, with 373 jets in the backlog as of Dec 31, 2023.

LMT expects to deliver 147-153 jets in 2024 and 156 in 2025 and beyond. This, along with the latest contract win, reflects the solid demand that the F-35 program enjoys in the combat jet market.

Growth Prospects

Amid the geopolitical tensions prevalent across the globe, nations are rapidly augmenting defense purchases to strengthen their warfare capabilities. This has led to an increased demand for fighter jets, which form an integral part of a country’s defense products. Per a report by the Mordor Intelligence firm, the global military aviation market is estimated to witness a CAGR of 5.23% during 2024-2030.

Such projections indicate immense growth opportunities for prominent combat jet manufacturers like Lockheed. Its Aeronautics segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgradation of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. The company’s fighter jet portfolio includes C-130 Super Hercules, F-16 Fighting Falcon jet and F-16 Fighting Falcon, in addition to F-35 jets.

Peer Opportunities

Other defense players that can gain from the expanding military aircraft market are Airbus SE EADSY, Boeing BA and Northrop Grumman NOC.

Airbus’ military aircraft consists of the A400M, C295 tactical transporter, the new-generation A330 Multi Role Tanker Transport and the Eurofighter, the most advanced swing-role fighter ever conceived. The company delivered a total of 1,783 military aircraft as of Dec 31, 2023.

EADSY boasts a long-term (three-to-five years) earnings growth rate of 12.4%. The Zacks Consensus Estimate for Airbus’ 2024 sales indicates an improvement of 8.2% from the top line reported in 2023.

Boeing’s product portfolio includes a range of combat-proven aircraft like the F/A-18 Super Hornet, P-8, C-17 Globemaster III, EA-18G and a few more. In 2023, Boeing delivered 22 F/A-18s, nine F-15s, three T-7A Red Hawks and 11 P-8 models.

BA has a long-term earnings growth rate of 4%. The consensus estimate for Boeing’s 2024 sales indicates an improvement of 4.6% from the top line reported in 2023.

Northrop Grumman has built some of the world’s most advanced aircraft, ranging from the innovative B-2 Spirit stealth bomber to the game-changing E-2D Advanced Hawkeye. The significant awards won by NOC in 2023 included $2.1 billion for F-35 programs, $1.7 billion for E-2 and $1.5 billion for Triton.

NOC boasts a long-term earnings growth rate of 9.9%. The Zacks Consensus Estimate for Northrop Grumman’s 2024 sales indicates an improvement of 4.6% from the top line reported in 2023.

In the past three months, shares of LMT have risen 9.5% against the industry’s 3% decline.

Image Source: Zacks Investment Research

Zacks Rank

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.