Lockheed Martin Corporation (NYSE:LMT) continues to set new yearly highs, and at $221.64 on March 23, LMT stock is well on its way to its all-time high of $227.00 set last November. Lockheed stock is trading at its 2016 high and it has a consensus target price of $230.66, according to Zacks Investment Research. Some analysts have a $252.00 target this year. This is a reasonable price, given Lockheed’s upside potential.
Japan may be one of the aces propelling LMT stock to a new record-high and well within analysts’ top predictions in 2016. Japan, eager to maintain air superiority over China, has already committed to buying 42 “F-35” joint strike fighters (JSF), built by Lockheed Martin. But what Japan really wants is the “F-22 Raptor,” which the Pentagon does not sell outside of the United States. Such is Japan’s ambition that it has developed its own program to replace its fleet of 150 aging Boeing “F15Js.”
This Is a Big Deal for LMT Stock
Meanwhile, in 2013, the Department of Defense shut down F-22 production. It has only 188 such fighters after spending $67.3 billion, which has left the Air Force relying on 30-year-old conventional fighters. Lockheed Martin wants to modernize the F-22 to keep it capable against new counter-air threats. This would keep the program well-funded while the Pentagon mulls over the next generation fighter. (Source: “Skunk Works pushes investment in F-22 and F-35 over new aircraft,” Flight Global, March 18, 2016.)
But tensions are rising between China and the United States, plus its allies in the East and South China Seas are a cause for concern in Tokyo and Washington. Japan wants to be sure it can control its airspace, especially as security is one of the priorities of Prime Minister Shinzō Abe. The F-22 remains out of question, as does Japan building its own replacement, which would cost some $40.0 billion in development alone. (Source: “Japan, mulling new fighter jets, opens talks with defense contractors,” Reuters, March 21, 2016.)
The only solution would be for Japan to find a major partner to cut costs. Lockheed Martin said it would be very interested in developing what Japan is dubbing the “F-3.” There are other potential partners such as Boeing and Alenia from Europe, but given that Japan wanted the F-22, Lockheed has the upper hand. Meanwhile, Lockheed is benefiting from ongoing efforts to fight ISIS.
The demand for its missiles has been booming this year. Lockheed Martin supplies the majority of these weapons for the U.S. Air Force and U.S. allies. The company said it has quadrupled production of its “Paveway II” laser-guided bomb and is boosting manufacturing of its “Hellfire” missile. Lockheed Martin has even had to expand its factories to keep up with demand. (Source: “Look out ISIS: Lockheed Martin QUADRUPLES manufacturing of laser guided bombs and boosts production of hellfire missiles,” The Daily Mail, March 18, 2016.)
Lockheed stock typically gains after the company wins a defense contract. Lockheed Martin is now attracting the sort of attention more usually associated with a Boeing. NASA has invested some $20.0 million over the next year and a half to perform preliminary research. It is designing a quiet supersonic passenger airliner. The contract is the first step toward bringing back supersonic passenger jets after the retirement of the “Concorde” and Russian “Tu-144.” In the 1960s, Boeing was the major American aerospace contractor to work on a supersonic civilian airliner. The experimental plane could fly as early as 2020.
The Bottom Line on LMT Stock
Hewson said Lockheed’s major technological innovations would soon make their way into the futuristic weapons that defense officials have boasted for years. Until now, the results were often lacking. There were too many promises and little to show. Lockheed has the technology to start delivering beyond the illustrations on a computer screen or drawing board. Lockheed could build a hypersonic demonstrator aircraft the size of an F-22 stealth fighter for less than $1.0 billion.
That amount is pocket change for military programs now. (Source: “Lockheed Martin’s SR-72 Hypersonic Plane Could Be Built For Under $1B, Likely To Be Ready In 2030s,” International Business Times, March 16, 2016.) The combination of lucrative government defense contracts and new ventures in essential aspects of future technology give LMT stock the legs to survive market crashes, recessions, booms, and busts.