Eighteen Japanese F-2B fighter aircraft based at Matsushima Air Base were destroyed during a tsunami that hit the nation in March 2011. In recent months the Japanese government has officially stated it wants to take a larger role in its own national defense and ability to protect its interests. This will entail huge defense spending increases in the tens of billions of dollars.
"We are honored to play a role in helping Japan's F-2 fighter regain its full mission capability," said Roderick McLean, vice president and general manager of Lockheed Martin's Integrated Fighter Group, said in a statement at the time. "The delivery of the F-2 aft and leading edge flaps is a milestone accomplishment our team is privileged to contribute to Japan's restoration path. We're honored to partner with MHI to provide critical F-2 components enhancing Japan's aerial defense backbone."
The F-2 program is a joint Japan/U.S. development, production and maintenance program. Mitsubishi is the prime contractor and Lockheed Martin is the principal U.S. subcontractor. Production began in 1996, with the first delivery in 2000. This marks another step in the upgrading and enhancement of Japan's F-2 squadron. That should translate to more sales revenue for Lockheed in the year ahead as Japan moves forward to arm itself with the latest technologies.
There are other ways LMT can drive revenue, including operations in its "Space Systems" segment. LMT's innovations help it capture more of that business through partnerships that raise global communications, weather forecasting, space exploration and national security to new levels. Major international players will be bidding for more of what LMT makes and offers in those gigantic enterprises...global communications, weather forecasting and space exploration as well.
The sky is the limit for LMT, but how about its share price? Unless new contracts lift revenue that drop to the bottom line, the 52-week high around $144 may be the "ceiling" for a while. With its 49% payout ratio, the dividend may not be going much higher either which may put a lid on the stock's price.
Patient investors might want to see if the shares revisit the $130 level last seen on Oct. 23 of this year. If you buy shares at current levels use a conservative trailing stop of between 13% and 15%.
If a lower share price presents itself in the near future you'll experience a higher yielding dividend along with the company's growth-oriented leadership. This should help keep LMT investors content for the foreseeable future.
At the time of publication the author had no positions in any of the companies mentioned in this article.
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