Lockheed Martin Corporation (LMT) won a $59 million contract from the U.S. Air Force for additional Sniper advanced targeting pods. The award expands a contract initially awarded in Sep 2009, raising the total value of the contract to $95 million.

Lockheed has sold more than 650 aircraft weapon pods, which provide aerial cover for troops on the ground. The pods have been deployed on Air Force F-15, F-16, A-10 and B-1 aircraft and are now the most widely used targeting pod.

Lockheed Martin remains a key player within the military space and continues to benefit from strong defense spending. The company’s customer base includes both the U.S. and foreign governments and other commercial buyers. Lockheed’s traditional defense focus appears strong, with increasing interest from domestic and international customers. In addition, management intends to explore strong business opportunities beyond the traditional defense market, specifically in the areas of civil, governmental and commercial space businesses. The company mainly competes with Boeing Company (BA), General Dynamics Corporation (GD) and Northrop Grumman Corporation (NOC).

Going forward, we believe Lockheed Martin has significant upside potential based on strong defense outlays throughout 2010–11, above-industry average return-on-invested-capital and expanding product lines. However, these are offset by risks related to key projects execution, fate of high cost platform programs, lower top-line results in the Aeronautics segment, higher pension liability and a lower number of government satellite programs. We maintain our market Neutral recommendation on the Zacks #3 Rank (‘hold’) stock.

Zacks Investment Research

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