The U.S. Navy awarded a contract worth $15.6 million to Lockheed Martin (LMT) to produce paveway II Enhanced Laser Guided Training Rounds (ELGTR). The company will start working under this contract in the third quarter of 2011 at its Archbald, Pennsylvania, facility.
The contract is for the first year of a planned three-year procurement that will maintain continuous production of the ELGTR. The company has been producing ELGTR for the U.S. Navy since 1992.
The ELGTR helps keep the Warfighter operational and maintain combat readiness.
Lockheed Martin reported a 5.6% year-over-year increase in revenue in the third quarter of 2010. We expect continuous contract wins to mitigate, to an extent, the adverse effects of Defense budgetary constraints and other overhangs facing the company.
Raytheon Company (RTN), which also competes with Lockheed Martin, received a contract worth $32.4 million cost-plus-incentive-fee from the U.S. Navy.
During the third quarter conference call, the company guided earnings of $6.75 to $6.95 per share for full-year 2010.
The Zacks Consensus Estimate for fourth-quarter 2010 is $2.13 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $7.29 per share and $6.59 per share.
Given the overhang of defense budget cuts, headwinds in margins, execution risk of major programs, cost over-runs, higher pension liability and risk of retrenchment cost recovery; we maintain our “Underperform” recommendation on Lockheed Martin over the long term. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates a near-term downward pressure on the stock over the near term.
Based in Bethesda, Maryland, Lockheed Martin Corporation is a diversified defense company that primarily researches, designs, develops, manufactures, integrates, operates and sustains technology systems and products, apart from providing a host of management, engineering, technical, scientific, logistics and information services.
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