Lockheed Martin Wins $211M Navy Deal To Upgrade F-35 Jets

Lockheed Martin Corp. LMT's Aeronautics business segment recently won a contract for offering Block 4.1 common capabilities pre-modernization efforts to support the preliminary design review of F-35 Lightning II jets. The deal will cater to the U.S. Air Force and the nation's overseas partners.

Details of the Deal

Valued at $211.3 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Work related to this deal will be carried out in Fort Worth, TX.

Fiscal 2018 research, development, test and evaluation (Air Force); and international partnership funds will be utilized to partially finance the task. The project is expected to be completed by July 2019.

Recent Developments

The F-35 program is Lockheed Martin's largest program, which generated 25% of its total net sales and 64% of Aeronautics division's net sales in 2017. Evidently, the company's top line grew 12% in the fourth quarter at its Aeronautics segment, primarily driven by the F-35 program.

Meanwhile, Lockheed Martin seems to be enjoying a steady flow of contracts from the Pentagon each year and 2018 is no exception. Last month, the company won a modification contract worth $1.5 billion for the purchase of long lead material and parts related to low rate initial production (LRIP) of F-35 Lightning II air systems. Considering these contract wins, we expect the Aeronautics unit to reflect similar solid performance in the first quarter of 2018 as well.

Moreover, production of F-35 is expected to continue for many years, given the U.S. government's current inventory objective of 2,456 aircraft for the Air Force, Marine Corps and Navy; commitments from the company's eight international partners and three international customers as well as expressions of interest from other countries.

Additionally, Trump recently proposed fiscal 2019 defense budget that provisions for a spending plan of $21.7 billion on Aircraft. In particular, the These developments reflect solid growth prospects for Lockheed Martin's F-35 program, which in turn are likely to boost the company's profit margin. Budget proposal hints at an increase in Lockheed Martin's F-35 Joint Strike Fighter program and has allotted $10.7 billion for procurement of 77 F-35 Joint Strike Fighters.

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