By: Abhishek
Lockheed Martin Corporation (LMT) regained a contract worth $5 billion from the Pentagon, which the company had lost to rival contractor L-3 Communications (LLL) last June. As per the contract, Lockheed will provide logistics and maintenance services for the U.S. Special Operations Command.
The Defense Department decided to reinstate Lockheed Martin as the service provider citing urgent operational requirements. The duration of the contract is 9 years and will continue until March 1, 2018. The Defense Department suspended L-3 Communications from receiving any new order due to an ongoing investigation into allegations that the company has used a highly sensitive government computer network to collect business intelligence on its rivals and forwarded them without the knowledge of defense officials.
The $5 billion defense deal was originally awarded to Lockheed Martin in March 2009, but was terminated as soon as June 2009 due to an objection raised by L-3 Communications. A protest was raised by L-3 Communications citing that it was performing the same work for the command under a prior agreement.
During the first quarter earnings call, Lockheed Martin maintained its net sales forecast of $46.25 to $46.75 billion and earnings per share expectation of $7.00 to $7.20 for 2010. The Zacks Consensus Estimates for the second-quarter 2010 is $1.78 per share and for 2010 is $7.28 per share.
Based in Bethesda, Maryland, Lockheed Martin Corporation is a diversified defense company consistently winning contracts from defense departments. The most recent ones were a $44 million Marine Corps Targeting System Production Contract and a $142 million deal for Threat Detection Aerostat Systems. Lockheed Martin Corporation's key competitors are Boeing Company (BA), Northrop Grumman Corporation(NOC) and Raytheon Company (RTN).
We appreciate the contract gain by Lockheed and believe the company will modify its revenue and earnings outlook for 2010 to incorporate the positive impact of the contract win in its financial results. We, however, maintain a Neutral recommendation on the company due to defense cutbacks on high-cost platform programs, execution risk of major programs and higher pension liability.
Lockheed's Gain, L-3's Loss
Lockheed Martin regained a deal from the Pentagon, which it had lost to L-3 Communications last June. As per the agreement, the company will provide logistics and maintenance services for the U.S. Special Operations Command.
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