LMT Wins $69.8M Missile Contract – Analyst Blog

The largest US defense contractor, Lockheed Martin Corporation (LMT) won a $69.8 million contract from the Department of Defense for work on a missile-defense system.

 

The prime area of focus for Lockheed Martin will be to provide engineering work on the Aegis missile-defense complex through its systems and sensors business. Additionally, the company will also be providing initial maintenance and support services.

 

Lockheed Martin is the largest provider of IT services, systems integration, and training to the U.S. Government. Apart from serving the Department of Defense and other federal agencies, the company derives its business from foreign governments and from commercial sales of its products, services and platforms.

 

In the second quarter of 2010, Lockheed Martin reported 3.0% year-over-year increase in total revenue amounting to $11.4 billion. The company’s earnings per share from continuing operations soared 4.8% to $1.96 while GAAP EPS increased 18.1% to $2.22.

 

The future prospects of Lockheed Martin, to a large extent, depend upon defense spending, and we believe the company stands well-positioned to benefit from higher defense outlays. Also, the company’s focus on debt repayment and share buyback is encouraging and will continue to improve the shareholder return.

 

However, political uncertainty makes future defense budgets vulnerable to cutbacks. Moreover, execution risk of major programs and higher pension liability remains primary cause of concern. Prime competitors of the company include Boeing Co. (BA), Northrop Grumman Corporation (NOC), and Raytheon Co. (RTN).

 

We currently maintain a Zacks #3 Rank (Hold) and a long-term Neutral recommendation on the stock.