Lockheed Wins $424.7M Contract - Analyst Blog

Lockheed Martin Corporation (LMT) announced that it received a contract worth $424.7 million from the U.S. Air Force to produce geosynchronous orbit  (GEO) Satellite 4. The work will be done by the company's Space Systems Company of Sunnyvale, California.

Lockheed is working on this Satellite project for quite some time and the previous order for satellites came in June 2009. The company had then received a $1.5 billion contract for the third highly elliptical orbit payload, the third GEO satellite and associated ground modifications for the Space-Based Infrared System constellation.

These satellites were developed by Lockheed Martin as a part of the Space Based Infrared System Program. This program was designed to provide early warning of missile launches, and simultaneously support other missions including missile defense, technical intelligence and battle space awareness.

During the third quarter 2010, Lockheed experienced a sales ramp in satellites, attributable to a higher volume in government satellite activities, which was partially offset by lower sales volume on commercial satellites.

Adjusted earnings of Lockheed for third-quarter 2010 were $1.55 per share versus $2.04 per share at the end of third-quarter 2009. The Zacks Consensus Estimates for fourth-quarter 2010, fiscal year 2010 and fiscal year 2011 are $2.13 per share, $7.28 per share and $6.58 per share, respectively.

Lockheed's peers also regularly receive contracts from the Defense Departments. General Dynamics Corporation (GD), a Lockheed peer, recently signed a contract worth $122 million to provide information technology services to the U.S. Army Europe headquarters in Heidelberg, Germany, and other sites in Germany and at Camp Bondsteel in Kosovo.

Despite the contract wins, we believe that the cost savings initiatives of the Defense Department, through reduction of defense budget by $178 billion over the next five years, will impact all major defense operators including Lockheed.

Lockheed Martin currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-term Neutral rating on the stock.

Based in Bethesda, Maryland, Lockheed Martin operates globally in the fields of research, design, development, manufacture, operation, and sustainment of advanced technolgy systems and products.

 
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