Lockheed Martin Scores a $15.5 Billion Bonanza for New F-35s. Is the Stock a Buy for 2025?
Saturday, Jan 11, 2025 9:58 am ET
Lockheed Martin Corporation (LMT) has scored a significant victory with a $15.5 billion contract for the production of 145 F-35 Lightning IIs as part of Lot 18. This contract, announced on Dec. 20, 2024, is expected to be completed by June 2027. The deal includes a mix of F-35A, F-35B, and F-35C variants for the U.S. Air Force, Marine Corps, Navy, and international customers. This contract comes after Lockheed Martin internally funded the F-35 production line while negotiations for Lots 18 and 19 were ongoing.

The contract is an "undefinitized" one, meaning the details and modalities will be finalized later, possibly by the early months of 2025. It also has a "not-to-exceed" pricing of $11.8 billion, ensuring that the cost of the contract cannot exceed this amount. The contract includes 48 F-35A aircraft for the Air Force, 16 F-35B aircraft and five F-35C aircraft for the Marine Corps, 14 F-35C aircraft for the Navy, 15 F-35A aircraft and one F-35B aircraft for F-35 non-U.S. DoD program partners, and 39 F-35A aircraft and seven F-35B aircraft for Foreign Military Sales (FMS) customers.
This contract is a relief for Lockheed Martin, which had been sustaining losses on the Lots 18-19 aircraft since the third quarter of 2024. The company expects to receive contractual authorization and funding on the Lots 18-19 production contract with the U.S. Government and resume invoicing costs incurred and recover sales, profit, and cash in the fourth quarter of 2024. This recovery is expected to continue into 2025, contributing to the company's overall revenue and profit.
The F-35 program has faced challenges such as inflation, cost overruns, supply chain disruptions, and technical problems. However, the recent contract win demonstrates the U.S. government's commitment to the program and the international demand for the F-35. Lockheed Martin maintains goals to build 156 F-35s annually and deliver 540 fighters over the next three years. With the Lot 20 long lead contract in hand and the Lots 18 and 19 agreements on the near horizon, Lockheed Martin could be turning the corner on its F-35 setbacks.

In conclusion, the $15.5 billion contract for the production of 145 F-35 Lightning IIs as part of Lot 18 is a significant win for Lockheed Martin. The contract is expected to have a positive impact on the company's financial outlook for 2025, contributing to revenue and profit recovery, ensuring production continuity, securing future deliveries, and providing additional international sales. Investors should monitor Lockheed Martin's progress in executing this contract and its ability to meet its financial targets.