Time to Be Bullish on LMT Stock
Lockheed Martin Corporation (NYSE:LMT) is officially trading at its highest price ever. Lockheed Martin stock hit $250.52 on July 6 and closed at $250.08.
There is one overwhelming reason for investors to consider Lockheed Martin stock: it’s simply the number one defense sector company in the United States—and possibly the world. LMT stock should continue its record climb and I can think of two reasons why, just off the cuff. One is the potential contract with Iran for helicopters and the second is an intensifying demand for the company’s “F-35” fighter jet.
There is a third reason, though, for LMT stock’s bullish potential that ties into the second reason: the overall global situation of uncertainty amid the Brexit outcome, ISIS threats, and heavier Russian and Chinese military spending.
While the United States is the one major superpower, there is no shortage of wannabe candidates challenging each other for the second-best ranking. Tensions exist in every corner of the world. Military spending is sure to increase in the United States to deal with multiple threats, regardless of who wins the presidential election in 2016. That said, LMT stock has already started to reflect and gain from this worldwide geopolitical uncertainty.
Over the course of 2016, Lockheed Martin stock has gained well over 15% and there is nothing to indicate that the maker of the famous “F-16” and “F-15” fighter jets is about to slow down. In fact, LMT stock could easily reach $275.00, which is what most analysts are targeting for 2016.
Lockheed Martin is expanding all aspects of its business. One of the sources of this expansion is a helicopter. Not just any helicopter, mind you, but one from Sikorsky Aircraft, the maker of the “Apache.” LMT bought Sikorsky from United Technologies Corporation (NYSE:UTX) less than a year ago and it already has some interesting plans to expand production.
In fact, some of these interesting plans might border on controversial—but fully legal and legitimate—strategies. The point is that LMT wants to sell more helicopters, even as the market for these items has dropped due to low demand from traditional customers like oil companies. This kind of problem requires unusual solutions, but only a company with the influence of Lockheed Martin could pull this off.
Indeed, Lockheed Martin has gone as far as studying the possibility of selling civilian helicopters to Iran. The company is currently seeking guidance from the U.S. government on the matter. The fact that Boeing Co (NYSE:BA) is close to sealing a deal with Iran that could be worth as much as $17.6 billion suggests Lockheed Martin is not pursuing a hopeless mission.
Some of you may balk at the idea of LMT stock selling to Iran, but from a purely financial point of view, you should re-consider. Would it not be better for an American company, rather than a European one, to benefit from billions of dollars of potential contracts in Iran?
Indeed, several European industry players have already signed contracts in Iran since sanctions were lifted in January. Airbus Group SE won a $25.0-billion contract for 118 aircraft from Iran Air, which sent Airbus stock flying. The European consortium, AgustaWestland, said it received expressions of interest for its helicopters from operators in Iran. There is demand and LMT stock can only gain from the potential size of a market that has not seen a new helicopter in more than three decades!
The other big reason why Lockheed Martin stock is such an interesting proposition is that the F-35 is winning more orders from air forces worldwide. Several air forces, from the United States Air Force (USAF) to the Royal Air Forces (RAF) of Britain and Japan have already bought the F-35. Additionally, Denmark recently approved a $15.0-billion contract for the F-35. (Source: “Denmark nears final decision on controversial fighter jets,” The Local, April 28, 2016.) Commercially, the outlook for the F-35, even if Canada drops out of the program, is excellent.
It may not be good for the governments buying them, given the F-35’s cost is almost twice as much as the F-16s they replace, but for LMT investors, it’s a good deal. The unit price for a single F-35 is approximately $85.0 million. (Source: “F-35 Cost May Drop to $85 Million by 2019,” Military.com, March 16, 2016.)
The incentive for LMT stock is self-evident given the uncertainties of the present geopolitical chessboard. Lockheed Martin’s F-35 is the best assurance when confronting the anti-aircraft missile systems being developed by the Russians, the Chinese, and the Iranians—giving Lockheed Martin stock shareholders a bullish outlook at this time.