Lockheed Martin Corporation LMT recently received a Letter of Offer and Acceptance from the Czech Republic government for its 5th Generation F-35 Lightning II aircraft. This should expand LMT’s international revenues in the coming years.
Czech Republic’s government intends to procure 24 F-35 Lightning II jets and will receive the first aircraft in 2031. Alongside, LMT will provide personnel training, service and logistical support, and other support services to the country.
Significance of F-35
The F-35 is the most lethal, survivable and connected fighter jet in the world. With operations from 32 bases worldwide, the F-35 fleet has surpassed nearly 773,000 cumulative flight hours. As of January 2024, Lockheed Martin has delivered more than 990 F-35s and trained more than 2,280 pilots and 15,400 maintainers.
The F-35 program remained the largest revenue generator for Lockheed’s Aeronautics business unit, accounting for 64% of the segment’s net sales in 2023. LMT expects to deliver 147-153 jets in 2024 and 156 jets in 2025 and beyond. Successful delivery of the F-35 jets in due time, along with the recent agreement, should significantly bolster its revenues in the coming quarters.
Lockheed’s Place in Europe’s Fighter Aircraft Market
Amid the geopolitical tensions prevalent across the globe, nations are rapidly augmenting their defense purchase to strengthen their warfare capabilities, with the European nations being no exception. Many countries in Europe are looking to replace aging fighter aircraft. This has led to an increased demand for fighter jets across Europe. To this end, a report by the Mordor Intelligence firm anticipates Europe’s fighter aircraft market to witness a compound annual growth rate of more than 4% during the 2024-2029 period.
Such projections indicate immense growth opportunities for Lockheed Martin. The company’s fighter jet portfolio includes the C-130 Super Hercules, the F-16 Fighting Falcon jet and the F-16 Fighting Falcon, in addition to F-35 jets, which also enjoy a solid demand in Europe’s fighter aircraft market.
Coming to the company’s recent achievements, on Jan 10, 2024, Lockheed Martin successfully delivered the first two F-16 Block 70 jets for Slovakia. In December 2023, the company delivered Belgium’s first F-35A Lightning II to the Belgian government.
Peer Opportunities
A few other defense players that can gain from the expanding European fighter aircraft market are Airbus SE EADSY, BAE Systems PLC BAESY and Northrop Grumman Inc. NOC.
Airbus has a strong presence in France, Germany, Portugal, Spain etc. As of Dec 31, 2023, the company had orders for 1,097 military aircraft from Europe. Its portfolio includes the A400M airlifter, C295 tactical transporter, A330 Multi Role Tanker Transport and Eurofighter.
EADSY boasts a long-term earnings growth rate of 12.4%. The Zacks Consensus Estimate for Airbus’ 2024 sales indicates an improvement of 9.4% from that projected in 2023.
BAE Systems is a prime contractor of the F-35 program and is responsible for the development, production and sustainment of each jet. The company is also part of the Eurofighter Typhoon program, which is Europe’s largest collaborative defense program, bringing together the four partner nations – Germany, Italy, Spain and the U.K. – along with Europe’s largest defense companies, Airbus Defence & Space, BAE Systems and Leonardo.
BAESY boasts a long-term earnings growth rate of 14.2%. The Zacks Consensus Estimate for BAE Systems’ 2024 sales indicates an improvement of 29.4% from that reported in 2023.
Northrop Grumman is among Europe’s leading defense and security providers, with businesses in France, Germany, Italy, Poland and the Netherlands. NOC is also a principal partner for the F-35 Lightning II program.
NOC boasts a long-term earnings growth rate of 3%. The Zacks Consensus Estimate for Northrop Grumman’s 2024 sales indicates an improvement of 4.3% from that reported in 2023.
Price Performance
In the past year, shares of LMT have lost 7.1% compared with the industry’s 9.9% decline.
Zacks Investment Research
Image Source: Zacks Investment Research
Zacks Rank
Lockheed Martin currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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