Lockheed Martin Wins $142 Million Army Contract

The U.S. Army awarded Lockheed Martin Corporation (LMT) a $142 million contract to produce additional Persistent Threat Detection System (PDTS) to support armed forces.

The PTDS tethered balloons are built with a surveillance mechanism aimed at detecting roadside bombs. These helium-filled balloons can stay in the air for weeks at a time, serving as eyes in the sky, protecting soldiers and civilians. The U.S. Army is using the system since 2004.

The PTDS delivers real-time surveillance and actionable intelligence to army troops to help them in life-threatening situations. It provides low-cost, continuous communications and persistent surveillance capabilities not possible with other types of manned and unmanned aircraft.

Lockheed Martin said final terms of the contract are still being negotiated. The order is in addition to another Army order for the system in the past six months.

Lockheed Martin is the largest defense contractor in the world. The company’s customer base includes the U.S. government, foreign governments,and other commercial buyers. The company is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2009 sales of $45.2 billion.

Going forward, we believe Lockheed Martin has significant upside potential owing to the Obama Administration’s focus on Smart Power application and cyber security. The company had an order backlog of approximately $75 billion at the end of the first quarter of 2010.

Lockheed Martin has one of the strongest balance sheets among its peers with a low long-term, debt-to-capitalization of 55.6% after first quarter-end 2010. Looking ahead, Lockheed Martin’s focus on debt repayment and an ongoing share repurchase program will continue to improve shareholder return.

This will however be offset by defense cutbacks on high-cost platform programs, execution risk of major programs and higher pension liability. Our long-term recommendation for Lockheed Martin is Neutral. We expect the stock to perform mostly in line with the broader market.