Lockheed Martin Corporation’s (LMT) F-35 Lightning II Joint Strike Fighter will continue to have two separate, interchangeable engines, which are under development.
Of the two engines under development, United Technologies Corporation’s (UTX) Pratt & Whitney F135, is being used as the main engine. The second engine, F136, developed by General Electric Company (GE) and Rolls-Royce plc is being developed as the alternative engine. Earlier in April, the market was abuzz that the engine buffet for F-35 will end. In April, the U.S. Defense Department issued an order to stop work on the F136 engine.
The contentious second engine for F-35 fighter jet received a boost from a U.S. House of Representatives committee preparing its version of a fiscal 2012 defense spending bill. The Committee voted 54 to 5 allowing General Electric and Rolls-Royce to continue developing their engine at their own cost.
This comes as welcome news for the duo that was planning to spend more than $100 million out of their own resources for developing the engine. The duo estimates over the long-run the engine will bring in about $100 billion of business.
Lockheed’s F-35 is a supersonic, multi-role, stealth fighter developed and funded by a consortium of nine countries, including Canada. It is designed to excel in both air-to-air and air-to-ground operations and features the most comprehensive and powerful avionics that any fighter aircraft has ever produced. Lockheed is developing the F-35 together with its principal industrial partners, Northrop Grumman Corporation (NOC) and BAE Systems Plc.
Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus and a steady inflow of follow-on orders with a leveraged presence in the Army, Air Force and Navy. However, the ongoing trend of governmental delays in program decisions coupled with program cancellations has affected the fortunes of the defense industry in general and Lockheed Martin in particular.
Lockheed Martin currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock.
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