Why Is the U.S. Air Force Buying $1.9 Billion in New Missiles From Lockheed Martin?

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Rich Smith, The Motley Fool

Sat, Mar 29, 2025, 6:09 AM 5 min read

Big declaration announcements astatine the U.S. Pentagon tin hint investors successful to the imaginable for lucrative stock wins from the companies that triumph those contracts. It doesn't ever enactment this way, but it does sometimes. That's wherefore I'm paying attraction present to 1 of the biggest weapons contracts announced by the Department of Defense successful caller weeks: A March 13 bid from the Air Force instructing Lockheed Martin (NYSE: LMT) to proceed with accumulation of bid "Lot 23" of the Joint Air to Surface Standoff Missile (JASSM) and besides bid "Lot 9" of the Long-Range Anti-Ship Missile (LRASM), and to hole for consequent tons arsenic well.

Both these rocket types person been requested by Ukraine for usage successful its antiaircraft warfare against Russia. Additionally, some weapons systems acceptable wrong the Pentagon's plans to amended the United States' long-range onslaught capabilities successful the Pacific theater.

The Pentagon did not specify precisely however galore missiles Lockheed volition beryllium building, and amounts look to alteration from batch to lot. However, a 2023 Defense Department papers described the sizes of accumulation tons arsenic ranging from 550 to 810 missiles per JASSM lot, and from 120 to 240 missiles per LRASM lot. We besides cognize overmuch much precisely what the Pentagon plans to wage for these missiles: $1.9 billion.

The Pentagon's declaration announcement besides clarifies that the accumulation tons successful question are portion of a bigger rearmament task that has the Air Force ordering $5.2 cardinal worthy of the missiles successful total. And with 3 much accumulation tons each anticipated for some the JASSM and the LRASM, it's apt the size of this declaration -- and its worth to Lockheed Martin -- volition proceed to grow.

But precisely however overmuch tin contracts similar these determination the needle astatine a elephantine defence institution similar Lockheed, which did $71 cardinal successful defence concern past year, and recorded much than $5.3 cardinal successful profits from it?

That's really harder to find than you mightiness think.

Most years, Lockheed Martin's missiles and occurrence power part (MFC) is simply a beauteous large business. From 2019 done 2023, according to information from S&P Global Market Intelligence, MFC rang up $7.8 cardinal successful operating nett connected $58.7 cardinal successful revenue, earning an outstanding 13.3% operating nett borderline connected this portion of its business. In the last 4th of 2024, however, thing went earnestly awry astatine MFC.

Without warning, the institution took an $804 cardinal complaint to net for this part -- and only this division. All connected its own, this complaint drove a 23% year-over-year diminution successful Lockheed's yearly nett for 2024, contempt revenues rising 5% past year, and MFC revenues successful peculiar rising 13%.

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