What comes after this contract runs out? If I were to venture a guess, the fact that someone (i.e. That's more than $700 million (and over $2.50 per share) in incremental annual pre-tax profit, on average, for that period. An 11.4% margin on $62 billion of sales equates to nearly $7.1 billion in profit that Lockheed will earn over the next 10 years from a weapons system that was all but extinct. So assume that Lockheed Martin can earn at least an 11.4% margin on all these new F-16s it will be building - a plane model for which Lockheed made zero deliveries in 2019, zero deliveries in 2018, and only eight deliveries in 2017. These margins, however, have been depressed by the large number of lower-margin F-35s that Lockheed has been delivering of late, and the relatively fewer numbers of F-16s, where the production design is more mature - and more profitable.įrom 2010 to 2015, when Lockheed was building more F-16s and fewer F-35s (in fact, F-35 deliveries didn't begin until 2011), the segment's operating margin ran as high as 11.4% - and margins sometimes exceeded 13% in the five years before that! Lockheed Martin's Aeronautics division, which builds both the F-35 and the F-16, has averaged operating profit margins in the 10.5% to 11% range over the last five years, according to data from S&P Global Market Intelligence. So what does this sale mean for Lockheed Martin, in dollars and cents? Here's how I look at it:

Lockheed's savvy move to begin producing the F-16 in India, moreover, promises to help the F-16 undercut the competition on price for years.īut you don't even need to project cost-cutting benefits to see how this deal will benefit Lockheed Martin stock and the company's bottom line. With a roughly $30 million price tag, an F-16 sells for less than 80% of the sticker price of Sukhoi's Flanker. Presumably, one of the reasons the F-16 remains so popular is its cost. And the latest issue of FlightGlobal's World Air Forces report confirms that 2,280 Lockheed Martin F-16 Falcons are in use by air forces around the globe - more than twice as many as the world's next-most-popular fighter, the Sukhoi 27 'Flanker'. It only makes sense that it should make the world's most popular fighter jet.

Lockheed Martin is the world's biggest publicly-traded defense company.

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