Lockheed Martin Nabs $258M US Air Force Contract

Lockheed Martin (LMT) has been awarded a $258.311 million firm-fixed-price contract for Evolved Strategic Satellite Communication (ESS) contract from the US Air Force.

“This contract will develop a prototype payload and conclude in a hardware and software in-the-loop, end-to-end demonstration” states the US Department of Defense, which adds that the contract is the result of a sole-source acquisition.

Work will be performed in Denver, Colorado, and is expected to be completed June 2025.

According to the announcement, fiscal 2020 research, development, test and evaluation funds in the amount of $29,447,172 are being obligated at the time of award.

The Space and Missile Systems Center, Los Angeles Air Force Base, California, is the contracting activity (FA8808-21-C-0015).

Following Lockheed’s quarterly results, Cowen & Co. analyst Cai Rumohr reiterated his Buy rating as well as a price target of $410 (17% upside potential).

In a note to investors on Oct. 20, Rumohr wrote: “Solid Q3 beat & 2020 guide nudge are in line with LMT’s beat & raise pattern. But investors will focus on narrow 2021 sales guide hike of 2.6% to “at least $67B” vs. Street’s $68B. Investors may be neutral/negative given concerns of slowing defense growth.” (See LMT stock analysis on TipRanks).

However ultimately the analyst sticks to the bull side, arguing that: “LMT’s continuing sales/EPS beats, 2020 hikes, and foreign order potential extend prospects for MSD (Management Systems Designers) gains; and its healthy cash flow & flexibility allow continuing HSD (Horizontal Situational Display) dividend hikes. Scarcity value merits its 13.6x 2021 TEV/EBITDAP.”

Currently, the Street is cautiously optimistic on the stock, with analysts split between hold and buy. This results in a Moderate Buy analyst consensus. The average price target of $450 implies upside potential of about 24% to current levels. Shares are currently trading down 7% year-to-date.