Lockheed Wins Contract – Analyst Blog

Lockheed Martin Corp. (LMT) won a contract modification from the U.S. Navy for their MH-60R and MH-60S helicopter programs valued at $12.7 million. The contract is expected to be completed by July 2012.

 

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. The company is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2009 sales of $45.2 billion.

 

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).

 

Going forward, we believe Lockheed Martin has significant upside potential owing to the Obama Administration’s focus on Smart Power application and cyber security. The company had an order backlog of approximately $75 billion at the end of the first quarter of 2010.

 

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. Looking ahead, Lockheed Martin’s focus on debt repayment and an ongoing share repurchase program will continue to improve shareholder return.

 

This will however be offset by defense cutbacks on high-cost platform programs, execution risk of major programs and higher pension liability. Our long-term recommendation for Lockheed Martin is Neutral. We expect the stock to perform mostly in line with the broader market.