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Vietnam Taps Foreign Military Aid in Dispute with China

The United States, China's chief global military rival, is considering the Vietnamese president's request in July for a lifting of a ban on selling lethal weapons. Washington has kept the ban since the end of the Vietnam war in 1975 but indicated this year it had moved into a new phase of supporting Vietnam over China.

A U.S. official indicated last month that Vietnam had shown enough human rights progress to be considered for the ban's end and Secretary of State John Kerry pledged more vessels for Vietnam as he visited the country in December.

Cancellation of the ban could open a new overseas market for top U.S. defense contractors Boeing (BA) , Lockheed Martin (LMT) and Raytheon (RTN) .

Russia is selling Vietnam six diesel-electric submarines as part of a $2 billion package arranged in 2009. Some subs are here now and the last one is due by 2016.

China won't say much about Vietnam's possible new sources of weaponry but will worry privately as a hostile Asian neighbor flexes muscle with the help of other countries with a history of tough relations.

"China undoubtedly won't be thrilled by Japan's naval vessel assistance to Vietnam," says Murray Hiebert, a senior fellow at the U.S. think tank Center for Strategic and International Studies.

"Beijing increasingly feels it is being encircled by the Obama Administration's rebalance to Asia, which includes improving ties with most of the Southeast Asian countries on China's southern flank," he says. "Japan's effort to improve military ties with Vietnam will probably prompt China to fear that Japan is now joining an anti-China front."

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates LOCKHEED MARTIN CORP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate LOCKHEED MARTIN CORP (LMT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, good cash flow from operations, growth in earnings per share, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.11% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, LMT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 56.82% to $977.00 million when compared to the same quarter last year. In addition, LOCKHEED MARTIN CORP has also vastly surpassed the industry average cash flow growth rate of -19.74%.
  • LOCKHEED MARTIN CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LOCKHEED MARTIN CORP increased its bottom line by earning $9.04 versus $8.34 in the prior year. This year, the market expects an improvement in earnings ($11.25 versus $9.04).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Aerospace & Defense industry average. The net income increased by 3.5% when compared to the same quarter one year prior, going from $859.00 million to $889.00 million.
  • LMT, with its decline in revenue, slightly underperformed the industry average of 1.3%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
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