Lockheed Martin (LMT)

Lockheed Martin (LMT) has consistently delivered positive earnings surprises with an average beat of just over 20% over the last four quarters. Shares have left the terminal and are on the tarmac getting ready for take off due to emboldening first quarter numbers that have allowed management to increase its operating profit, cash from operations and earnings per share forecast for 2014 with the international mix projected to rise to 20% of total sales this year. In 2013, Lockheed Martin’s net sales were $45.4 billion.

Shareholders on this flight have already been rewarded with share repurchases and incremental dividends including seventy-eight percent or $1.6 billion of a record $2 billion in free cash flow in the first quarter. Shares will soar because the largest U.S. defense contractor Lockheed Martin has a platform-centric focus that assures a continual inflow of follow-on orders from its leveraged presence in the Air Force, Army, IT, and Navy programs. We expect clear skies as the I Know First self-learning algorithm based on predictive analytics also has a bullish signal for this aerospace and defense behemoth, as well as LMT has a mean price target of $170.56 from 18 brokers on Yahoo! (YHOO) finance. Lockheed Martin’s diverse range of products have allowed this company to win multiple contracts mainly from the U.S. Department of Defense (DOD), varying from big to small, despite the “sequestration.”

The Final Frontier

Recognizing the potential in this market, Lockheed has increasingly invested in R&D and acquisitions in order to strengthen its satellite product coverage. As such, the company is anticipated to acquire Zeta Associates Inc., in the next quarter as it already acquired Astrotech Space Operations, a company specializing in prelaunch processing of satellites in May of 2014.

The US Air Force has also recently awarded a contract for the sustainment of the reentry subsystem for the Minuteman III intercontinental ballistic missile (ICBM) system to Lockheed Martin. In this contract, the company will provide support through maintenance engineering, aging surveillance, modification of subsystems and equipment, software maintenance, developmental engineering, production engineering, repair and procurement of the MMIII RS/RV Subsystems. Lockheed Martin Space Systems Company ICBM and advanced programs vice-president Doug Graham stated, “this new contract will enable us to directly apply our specialized expertise to more effectively support this critical national mission area.” The RS/RV contract has a one-year base performance period valued at $109 million with options for an additional four years and a total potential value of $452 million.

GEO-5 & The GEO-6

This past June, Lockheed Martin also earned a $1.86 billion contract from the US Air Force to complete production of the Geosynchronous Earth Orbit (GEO) satellites, the GEO-5 and the GEO-6 through Sep 30, 2022. Lockheed is the prime contractor of these satellites under the military’s Space Based Infrared System (SBIRS) program. SBIRS is designed to provide the United States with an early warning of ballistic missile launches plus other tactical intelligence. Jeffrey Smith, vice president of Lockheed Martin’s Overhead Persistent Infrared mission area stated, “this contract is the third part of a thoughtful acquisition strategy aimed at further reducing cost and cycle time for GEO-5 and GEO-6, while still providing exceptional data to the warfighter.” This system gives the President of the United States, the Secretary of Defense, combatant commanders, the intelligence community and other key decision makers reliable and accurate missile warnings and infrared surveillance information.

The GEO-1 and GEO-2 satellites have both received Air Force Space Command Operational Acceptance in 2013 and have performed above its requirements in some cases. The GEO-3 is currently undergoing acoustic and thermal vacuum testing at Lockheed Martin’s Sunnyvale, California satellite manufacturing facility and is on schedule for delivery at the end of 2014. The GEO-4 recently entered final assembly, integration and testing. The SBIRS program is at the forefront of our national security and further demonstrates the U.S. military’s confidence in Lockheed Martin technology and its reputation as an aerospace and defense industry leader.

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