Lockheed Martin’s must-know growth opportunities



Ramping up F-35 aircraft production

In terms of revenue, Lockheed Martin (LMT) is one of the largest defense contractors. Wars with Afghanistan and Iraq led to an increase in defense budgets, which has benefited LMT. Lockheed’s largest program, F-35 aircraft production, constitutes 17% of its total sales. However, the aircraft is still in the development phase. As such, the program’s production rate is low. The company plans to start full-scale production of the aircraft in the next few years, which will improve the company’s operation efficiency. The company has also reduced its staff expenses on the program, which will improve the margin profile.

The program has also received huge international interest. Countries like the United Kingdom, Japan, Norway, Australia, the Netherlands, Turkey, Israel, and Italy have already placed orders for F-35 aircraft.

LMT F-35 orders

As well as the above-mentioned countries, Singapore, Belgium, and Saudi Arabia and other Middle East countries have also expressed interest in buying the F-35 aircraft.

Higher international revenues

With countries across the world facing increasing threats, demand for advanced defense equipment is on the rise. This presents a good opportunity for Lockheed Martin, which plans to increase its international revenues to 20% from the current 17%, over the next few years.

Inorganic growth opportunities

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Lockheed Martin has been on an acquisition spree lately. It has already acquired five companies in this fiscal year so far and it plans to acquire a few more companies. A few of these acquisitions—like Amor Group, acquired in 2013—support Lockheed Martin’s strategy of boosting international growth. Other acquisitions increase Lockheed Martin’s presence across the value chain and lower its operating expenses. The company’s strong cash flow provides it with a good opportunity to pursue inorganic growth.

Other defense players in the U.S. include the Boeing Company (BA), General Dynamics Corp. (GD), and Raytheon Company (RTN)—some of which are also part of the iShares U.S. Industrials ETF (IYJ).


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