The No. 1 Reason to Like LMT Stock
U.S. defense group Lockheed Martin Corporation (NYSE:LMT) remains one of the most reliable stocks for investors to park their money. LMT stock skipped the stock market rollercoaster ride that took so many investors’ portfolios in January and February. Instead, Lockheed Martin stock reached an all-time record-high in November of $225.00 per share and is now trading in the same record range of $215.00–$220.00 per share.
As the biggest defense contractor in the U.S. in a period of stock market and geopolitical uncertainty, LMT stock stands out for being stable, at the very least. At best, as many analysts have rated it, LMT is a strong “Outperform” contender. Despite criticism, Lockheed Martin can count on major government defense contracts.
“Our government and industry team has a proven track record of overcoming technical challenges discovered during developmental and operational testing and fleet operations, and delivering on program commitments,” the company’s “F-35” program executive officer noted in a statement. (Source: “2015 DOT&E Report – Public Response Statement,” Lockheed Martin Corporation, January 29, 2016.)
Taxpayers may not be doing cartwheels, but LMT shareholders are doing a full acrobatic program. Indeed, Washington wants to buy more than 400 new F-35s. They will be distributed among the various branches of the military over the next five years for a “mere” $55.0 billion. (Source: “Exclusive: Pentagon’s budget plan funds 404 Lockheed F-35 jets – sources,” Reuters, February 5, 2016.)
These orders account for a small part of the F-35 sales potential. Several NATO member states have F-35s on order as well. The continuing tensions with Russia have no doubt helped to fuel sales of the advanced F-35 airplane. But Lockheed Martin is also extending its reach into civilian aerospace.
NASA awarded the company a research contract to design a quiet and efficient supersonic passenger airliner. The initial contract is for some $20.0 million over 17 months. In aerospace terms, this is less than pocket change. However, the contract is the first step toward bringing back supersonic passenger jets. In the 1960s, the Russians were the first to fly a passenger plane beyond the Mach barrier with the “Tu-144.”
The West is more familiar with the British-French “Concorde,” which served NY to Paris or London routes until the early 2000s. The Concorde has since been retired and nothing has replaced it.
NASA sees the lack of a Concorde replacement as a market gap that needs filling and it wants Lockheed Martin to develop a quieter and more efficient alternative to do just that. NASA is working to develop more environmentally friendly as well as faster airliners. The experimental plane could fly as early as 2020.
Supersonic flight is, once again, on the technological radar and market competition is already building. The NASA contract gives Lockheed Martin the opportunity to develop—using public funds—the basis for groundbreaking technology that will power the airliners of the next decade.
The American company Aerion plans to build a supersonic jet with Airbus, for which it already has its first customer—private jet company Flexjet. This is a small plane capable of carrying dozen passengers at a speed of Mach 1.5 (1,150.9 m/h).
The combination of lucrative government defense contracts and new ventures in essential aspects of future technology give LMT stock the legs to sustain market crashes, recessions, booms, and busts. Few stocks offer as reliable a return as Lockheed Martin.