Lockheed Martin (LMT) Wins Deal for Supplying F-16 Retrofits

Lockheed Martin Corp.’s LMT business segment, Aeronautics, recently secured a modification contract for providing F-16 retrofits. The deal has been awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

Valued at $33.6 million, the contract is projected to get completed by Dec 31, 2023. Per the terms, Lockheed will offer the Kapton replacement harness installation, harness one-time inspections, and aircraft mod line extension of 140 Taiwan F-16A/B aircraft.

Work related to this contract will be carried out in Fort Worth, TX.

Importance of the F-16 Jets

Over the past decade, a rapid rise in global terrorism and adverse geopolitical situations across borders has boosted demand for defense products, with combat aircraft constituting a major portion of that portfolio. It is imperative to mention here that the F-16 Falcon jets have significantly grown in importance on a global scale over the past few years.

Over the past couple of years, the F-16 witnessed significant development, with nations like Taiwan, Bulgaria, Morocco and Bahrain signing agreements to procure new F-16 aircraft. To reap the benefits of the rising demand for F-16, Lockheed Martin introduced F-16 Block 70/72 in 2020, the most advanced F-16 aircraft, combining numerous capabilities and structural upgrades. This model provides a new aircraft structure that lasts 50% longer than the previously produced F-16 aircraft.  

Such advancements might have been ushering in contracts from Pentagon and other U.S. allies, like the latest one, thus boosting Lockheed Martin’s revenue prospects.

Growth Prospects

With rising security threats across the globe, emerging economies like the Asia Pacific, the Middle East and South America are spending a lot on enhancing their defense arsenals. Meanwhile, developed nations like the United States and Europe have already been leading the defense market. With the United States being the largest weapons exporter worldwide, the nation has been spending significantly on defense products including combat aircraft.

Lockheed, being a prominent combat aircraft manufacturer in the United States, thus enjoys a dominant position in the combat aircraft market.

Per a Mordor Intelligence report, the global combat aircraft market is expected to witness a CAGR of more than 4% during the 202-2031 time period, with North America constituting the largest share of this market. Such growth can be attributed to a rise in global threats and geopolitical instabilities, and increased spending on defense. These projections should benefit Lockheed along with other U.S.-based combat jet manufacturers like Boeing BA, Northrop Grumman NOC and Textron TXT.

Boeing’s Defense, Space & Security segment engages in the research, development, production and modification of manned and unmanned military aircraft. This segment's primary products include military aircraft including F/A-18E/F Super Hornet, F-15, P-8, KC-46A Tanker, and T-7A Red Hawk aircraft.

BA stock boasts a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for 2022 earnings implies growth of 137.2% from the 2021 reported figure.

Since its inception, Northrop Grumman has been a pioneer in the development of manned aircraft for combat. Northrop Grumman also has a tradition of providing technological leadership in all aspects of military aviation and aircraft, such as manned, unmanned, targeting, surveillance, and aircraft self-protection systems that enable warfighters to accomplish missions anytime, anywhere and under any conditions.

NOC stock boasts a long-term earnings growth rate of 6.2%. The Zacks Consensus Estimate for 2022 sales suggests growth of 2.6% from the 2021 reported figure.

Textron’s business unit, Textron Aviation Defense designs, builds and supports versatile and globally known military aircraft preferred for training and attack missions. Some of Textron’s renowned products include Beechcraft T-6C trainer and AT-6 Wolverine.

TXT stock boasts a long-term earnings growth rate of 11.8%. The Zacks Consensus Estimate for 2022 earnings indicates growth of 21.8% over 2021’s reported figure.

Price Movement and Zacks Rank

Shares of Lockheed Martin have gained 17.6% in the past year against the industry's decline of 34.6%.

Image Source: Zacks Investment Research

The company currently carries 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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