News

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently secured a modification contract involving its advanced F-16 Block 70/72 aircraft. The award has been offered by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

Details of the Deal

Valued at $520.4 million, the contract is projected to be completed by Jun 30, 2028. The latest modification expands the current long lead materials contract to begin production tasks of the Viper Shield electronic warfare suite for the F-16 Block 70/72 aircraft.

Work related to this deal will be executed in Fort Worth, TX. This contract will serve the Kingdom of Bahrain, the Republic of Bulgaria, the Kingdom of Morocco, the Slovak Republic and the Taiwan Air Force.

The latest modification brought the cumulative face value of the contract to $897.4 million.

What’s Favoring Lockheed?

As countries around the world are investing more in modernizing their air combat fleets, the need for reliable, multi-role fighter aircraft has become paramount. With Lockheed enjoying a dominant position in the combat aircraft market, supported by its extensive product portfolio, including the F-35 Lightning II, C-130 Hercules and F-22 Raptor, apart from F-16 jets, it enjoys frequent order flows from the U.S. Air Force as well as other international partners. The latest contract win is a bright example of that.

Notably, Lockheed’s F-16 Block 70/72 is the most advanced 4th generation fighter ever built, which comes with next-generation capabilities like high-resolution Center Pedestal Display (“CPD”) and Northrop Grumman’s NOC 5th generation APG-83 AESA radar. Moreover, L3Harris’ Viper Shield all-digital electronic warfare (EW) suite has been custom-designed to be integrated into the F-16 Block 70/72 aircraft. Impressively, the F-16 Viper modification offers a scalable, advanced avionics upgrade to F-16 jets.

Such state-of-the-art features of the F-16 Block 70/72 aircraft must have been boosting the demand for this jet, which, in turn, has been ushering in solid order flows for the company like the latest one. This product’s robust demand can be further gauged from the fact that the backlog of the F-16 Block 70 program, as of March 2024, consisted of 133 aircraft for six countries.

What Lies Ahead for LMT?

Factors like increased defense budgets and the need for technologically advanced, agile fighter jets to ensure a nation's air superiority and national security to tackle widespread cross-border conflicts are fueling the growth of the fighter aircraft market. In this regard, the Morder Intelligence firm projects the global fighter aircraft market to witness a CAGR of 3.7% during 2024-2029.
Such growth opportunities can be expected to translate into more contract wins for Lockheed, which is a renowned combat jet manufacturer. Its Aeronautics unit is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies.

Moreover, LMT’s Advanced Development Programs (“ADP”) organization, also known as Skunk Works, is focused on future systems, including unmanned and manned aerial systems and next-generation capabilities for air dominance, hypersonics, intelligence, surveillance, reconnaissance, situational awareness and air mobility.

Peer Opportunities

A few other defense players that are expected to gain from the expanding fighter aircraft market are mentioned below:

Textron TXT: Its Textron Aviation unit is engaged in the production of fighter aircraft like the Beechcraft T-6 training aircraft and the Beechcraft AT-6 light-attack aircraft. The company also manufactures the Beechcraft Model 18 light bomber, the T-44 and T-34 training aircraft and the T-1A jet trainer.

TXT boasts a long-term (three-to-five years) earnings growth rate of 10.1%. The Zacks Consensus Estimate for 2024 sales indicates an improvement of 5.7% from that reported in 2023.

Boeing BA: Its Defense, Space & Security segment is engaged in the development, production and modification of 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 boasts a long-term earnings growth rate of 25.5%. It has a trailing four-quarter average earnings surprise of 17.83%.

Northrop Grumman: It 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 8.7%. The Zacks Consensus Estimate for 2024 sales indicates an improvement of 4.6% from that reported in 2023.

Price Performance

In the past year, shares of LMT have risen 1.5% against the industry’s 11.5% decline.

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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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