Lockheed Martin Wins A Flurry Of New Contracts In August

Lockheed Martin (NYSE:LMT) has received several contracts from the U.S. government in August. It received a $150 million contract from the U.S. Army to produce Terminal High Altitude Area Defense (THAAD) weapon system on August 15. ^[1] Then it gained a $64 million Joint-Air-Ground Missile (JAGM) system contract again from the U.S. Army on August 17. ^[2] Shortly thereafter it earned a $65 million Joint Light Tactical Vehicle (JLTV) contract from the U.S. Army and the U.S. Marine Corps on August 23. ^[3]

These contracts coupled with the order backlog, which stood at $75.5 billion at the end of second quarter of 2012, will help drive growth in top line for the company over the short-term. However, long-term growth concerns stay due to $500 billion in defense spending cuts by the U.S. government over the next decade.

We currently have a stock-price estimate of $95 for the company, approximately in line with its current market price.

See our complete analysis for Lockheed Martin here

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The contracts

The contracts received in the past month by the company from the U.S. government range from providing air-to-ground missiles and missile defense systems to light tactical vehicles that can transport troops safely through combat zones.

The THAAD contract seeks a missile defense system against short and medium range ballistic missiles in the terminal phase of flight. As part of this contract, Lockheed Martin will provide 12 THAAD weapon system launchers, 2 fire control and communication units, and related support equipment.

For the JAGM contract, Lockheed provides a 27-month technology development program that includes design, test and demonstration of joint air-to-ground missile system that significantly enhances warfighters operational flexibility and combat effectiveness.

Finally, the JLTV contract is a fixed-price contract under which the company has to provide 22 light combat vehicles within 12 to 14 months to the U.S. Army and U.S. Marine Corps. It consists of two primary variants: the utility carrier and shelter vehicle (JLTV-UTL) that is a two-seater and utility carrying vehicle; and the general purpose vehicle (JLTV-GP) that is four-seater meant for carrying troops through combat zones. The vehicles need to be more fuel efficient than their predecessors and should require low logistical support costs.

These contracts shall help the company meet its annual revenue target of $45 – $46 billion for the current year, and also add to growth over the short-term. However, long-term growth concerns for the company remain due to the U.S. defense spending cuts.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Lockheed Martin Receives $150 Million Contract To Produce THAAD Weapon System Equipment For The U.S. Army, August 15 2012, www.lockheedmartin.com [↩]
2. Lockheed Martin Awarded $64 Million JAGM Contract for Extended Technology Development, August 17 2012, www.lockheedmartin.com [↩]
3. Lockheed Martin Wins $65 Million JLTV Engineering and Manufacturing Development Phase, August 23 2012, www.lockheedmartin.com [↩]