Why Lockheed Martin Stock Just Popped
Key Points
Lockheed Martin just locked in $43.5 billion in new defense contracts.
Its share price has barely moved.
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Lockheed Martin (NYSE: LMT) stock jumped 2.8% through 1:15 p.m. ET Thursday on no obvious good news.
No obvious good news today, that is to say. But if you scroll back just a couple of days through the defense contract announcements posted by the U.S. Department of Defense on its website, I think you'll quickly find the reason why investors are so keen on LockMart stock today.
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An $8.2 billion contract -- and Lockheed stock falls
On Tuesday, DOD announced an $8.2 billion contract will go to Lockheed Martin to increase the number of Precision Strike Missiles (PrSMs) it can produce per year, and also the number of PrSMs the Army buys from Lockheed Martin.
Granted, the contract is spread over six years, ending in 2032, making the annual revenue increase only about $1.4 billion. Still, it seems strange that this news sent Lockheed Martin's stock down 2.4% yesterday!
A $35.3 billion contract, and Lockheed stock barely budges
Speaking of yesterday, yesterday's headline was Lockheed winning a $35.3 billion Missile Defense Command contract to produce Terminal High Altitude Area Defense (THAAD) Interceptor missiles -- used to shoot down exoatmospheric ballistic missiles -- also through 2032. Priced near $12.7 million per unit (about three times the cost of a Patriot missile), this contract envisions Lockheed producing an astounding 2,800 THAAD interceptors.
And over the next six years, it will add nearly $5.9 billion to Lockheed's annual revenue haul.
What it means for Lockheed stock
So two days of contracts just grew Lockheed's annual revenue haul by about $7.3 billion. Even on the defense giant's already sizable $75.1 billion revenue stream, that's close to a 10% increase. And Lockheed stock is only back to flat because of it?
Sounds like a buying opportunity to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
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