Lockheed Martin (LMT) Clinches $10B Super Hercules Deal

Pentagon’s leading contractor Lockheed Martin Corp. (NYSE:LMT) received a major $10 billion contract from the U.S Air Force to cover all future delivery orders of C-130J Super Hercules aircraft.

This contract covers all future delivery orders within its scope. The award will support the C-130J production program and work under this contract is slated for completion by Aug 18, 2026. This contract also involves foreign military sales.

About C-130J Super Hercules

The latest model in Lockheed Martin’s Hercules family – C-130J Super Hercules – is a four-engine turboprop military transport aircraft. The Hercules family has the longest continuous production run of a military aircraft in history. The C-130J crew includes two pilots and one loadmaster as no navigator or flight engineer is required on the aircraft.

The J-model is almost similar to the classic Hercules in terms of general appearance. However, it uses updated technology like the new Rolls-Royce (LON:RR) AE 2100 D3 turboprops with Dowty R391 composite scimitar propellers, digital avionics and reduced crew requirements. These improvements boosted its performance over its C-130E/H predecessors, resulting in 40% greater range, 21% higher maximum speed and 41% shorter take-off distance.

Being the largest U.S. defense contractor, Lockheed Martin holds significant potential given the positive budget revision for fiscal 2016 and 2017. The fiscal 2016 budget reflects an annual increase of approximately $25 billion. This is also the first raise in the annual DoD budget since 2012. Importantly, the budget represents a double-digit annual percentage increase in investment accounts to fund new equipment procurement and research and development activities.

Approximately 16 countries operate C-130J Super Hercules. Lockheed Martin continues to witness robust demand in the international market for its programs. In particular, missile defense continues to be a big driver for a number of Asia-Pacific and Middle East countries. Apart from strong demand for its tactical aircraft, F-16 and F-35, as well as mobility, C-130J, the company’s THAAD, Aegis, Aegis Ashore, Patriot, and MEADS are seeing solid traction.

Zacks Rank & Key Picks

Lockheed Martin currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Engility Holdings, Inc. (NYSE:EGL) , General Dynamics Corp. (NYSE:GD) and Leidos Holdings, Inc. (NYSE:LDOS) . While Engility Holdings sports a Zacks Rank #1 (Strong Buy), General Dynamics and Leidos Holdings carry a Zacks Rank #2 (Buy).

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