Lockheed Martin Corp. (LMT) won a contract from the U.S. Special Operations Command to provide full-scope logistics support to warfighters around the globe. The company will provide a wide range of mission-critical services, from aircraft and vehicle maintenance to IT and electronics support. The contract has a potential value of $5 billion spread over 10 years.
Under the contract, Lockheed Martin will repair and maintain the fleet of special operations aircraft, ground vehicles, weaponry and electronics equipment as well as manage a global supply chain of parts, warehouses, and depots. The company will also manage and upgrade the command’s critical infrastructure, from secure IT networks to worldwide facilities. Lockheed Martin will work with the Special Operations Forces Support Activity to implement leaner and more efficient business processes that will deliver more reliable, responsive support at lower costs and on shorter timelines.
Lockheed Martin remains a key player within the military space and continues to benefit from strong defense spending. The company’s customer base includes the U.S. Government, foreign governments and other commercial buyers. Lockheed’s traditional defense focus appears strong, with increasing interest from domestic and international customers. The company mainly competes with Boeing Co. (BA), General Dynamics Corp. (GD), and Northrop Grumman Corp. (NOC).
We believe Lockheed Martin has significant upside potential in future based on Obama Administration’s focus on Smart Power application and cyber security. Lockheed Martin finished the first quarter of fiscal 2010 with a backlog of $75 billion.
Lockheed Martin is slated to release its second quarter results of fiscal 2010 on Jul 27, 2010. The Zacks Consensus Estimate for the quarter currently stands at $1.78, lower than the year-ago quarterly earnings of $1.88.
Lockheed Martin has one of the strongest balance sheets among its peers with a low long-term debt-to-capitalization of 55.6% after first quarter-end 2010 (Zacks industry average was 93.2%). Lockheed continues to be a strong cash generator with its annual operating cash flow touching approximately $3.2 billion during fiscal 2009. Management is also prudent in returning a substantial portion of its free cash flow to shareholders through share repurchases and incremental dividends.
However, we believe all the above-mentioned positives have already been taken into account in the current share price of Lockheed Martin. This justifies the Zacks #3 Rank, which indicates a short-term “Hold” recommendation. Considering the company’s business model and fundamentals, we retain a long-term “Neutral” recommendation on the stock.
Read the full analyst report on “LMT”
Read the full analyst report on “BA”
Read the full analyst report on “GD”
Read the full analyst report on “NOC”
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