Lockheed Martin Slated To Win $3B F-35 Deal From Denmark

Lockheed Martin Corp. (NYSE:LMT) is all set to win another major contract for its F-35 fighter jet. The Danish government reached an agreement yesterday with coalition parties to go ahead with the purchase of 27 F-35A stealth fighter jets from Lockheed Martin.

Fight Against Terror

As the Danish Prime Minister Lars Loekke Rasmussen said last month, the “world security map has changed,” and hence revamping the fleet of the country has become inevitable. "The fighter jets are central to our participation in international missions in the Balkans, in Afghanistan, in Libya and recently in Iraq in the fight against ISIL (Islamic State)," Rasmussen told a news conference in May.

The order will replace an aged fleet of Lockheed Martin F-16s that Denmark has used since the early 1980s.

Order Detail

The latest agreement follows a May 12 announcement by the Prime Minister regarding the acquisition of 27 fighter jets worth 20 billion Danish crowns ($3.1 billion).

The coalition agreed on the fact that the Danish air force’s international presence will be circumscribed in the period spanning 2022–2026 owing to the changeover from the old F-16 jets. The country’s air force will not be able to take part in international operations between 2022 and 2024.

The first four of the F-35A stealth fighters are to be delivered in 2021, six in 2022 and the balance between 2023 and 2026. The coalition expects this phase to get over between 2021 and 2026.

Power of F-35

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. The company expects organic growth of 3–5% to be led primarily by the Aeronautics segment and specifically by the F-35 program.

As of Mar 27, 2016, the company delivered 160 production aircraft to the U.S. and allies. Additionally, it has 108 aircraft in backlog at Mar 2016 end. For 2016, it expects to deliver 53 more F-35s. Production of the aircraft is expected to continue for many years given the U.S. government’s current inventory target of 2,443 aircraft for the Air Force, Marine Corps and Navy.

Internationally, Denmark marks the 11th country to purchase these jets, joining the U.S., Britain, Australia, Turkey, Italy, Norway, the Netherlands, Israel, South Korea and Japan.

Zacks Rank

Lockheed Martin currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the aerospace and defense space include BAE Systems (LON:BAES) plc (OTC:BAESY) , Engility Holdings, Inc. (NYSE:EGL) and Leidos Holdings, Inc. (NYSE:LDOS) . While BAE Systems carries a Zacks Rank #1 (Strong Buy), Engility and Leidos hold a Zacks Rank #2 (Buy).

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