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Lockheed Martin, Tata Advanced Systems Join Forces for C-130J Jet

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Lockheed Martin Corp. (LMT - Free Report) recently inked an agreement with Tata Advanced Systems Ltd to establish a framework for enhancing business opportunities for LMT’s C-130J Super Hercules tactical airlifter. This should strengthen the long-standing partnership between Lockheed and Tata Advanced Systems, the Tata Lockheed Martin Aerostructures Ltd. (“TLMAL”) joint venture, established in 2010.

With India rising as one of the forerunners in the combat aviation market within Asia-Pacific, the latest agreement should bode well for LMT’s expansion in this space. 

A Brief Note on LMT’s Latest Collaboration
 

The latest agreement establishes a framework for collaboration, including the establishment of a Maintenance, Repair and Overhaul facility in India to serve the Indian Air Force's (“IAF”) existing fleet of 12 C-130Js as well as other worldwide Super Hercules fleets. As part of this agreement, Lockheed will expand C-130J manufacturing and assembly in India to produce aircraft for the IAF's Medium Transport Aircraft program, provided the U.S. and Indian governments approve.

The IAF is actively looking to buy up to 80 medium transport aircraft, having published a request for information in 2023. The latest expansion in partnership between Lockheed and Tata Advanced Systems is expected to cater to this demand for transport jets.

What Lies Ahead for LMT?
 

Rising geopolitical tensions, technical developments, higher defense expenditures from economic growth, comprehensive defense modernization projects and strategic alliances with Western defense contractors are all contributing to the combat aircraft market's expansion in the Asia-Pacific region.

This must have prompted the Morder Intelligence firm to project a CAGR of 6.4% for the Asia-Pacific Military Aviation market in the 2024-2030 period. Such estimates suggest enormous expansion prospects for major combat aircraft makers such as Lockheed, which enjoys a solid presence in this market.

TLMAL is currently engaged in manufacturing the F-21 advanced multirole fighter aircraft, while the MH-60R is presently the largest program for LMT in India. Outside India, Lockheed has a solid presence in other parts of Asia-Pacific, which include Singapore, Japan and Australia.

Opportunities for LMT’s Peers
 

A few other defense players that can gain from the expanding military aviation market in the Asia-Pacific region are The Boeing Company (BA - Free Report) , Airbus Group (EADSY - Free Report) and Northrop Grumman (NOC - Free Report) .

Boeing has a strong presence in the Asia-Pacific region. It has supplied combat jets to India, which include a range of combat-proven aircraft like the AH-64 Apache, P-8I Poseidon, C-17 Globemaster III and CH-47 Chinook.

Boeing has a long-term (three to five years) earnings growth rate of 21.3%. The Zacks Consensus Estimate for BA’s third-quarter 2024 sales suggests year-over-year growth of 10.8%.

Airbus is one of the biggest suppliers of combat jets for the Asia-Pacific region. The company is providing the IAF with several military aircraft, including the C295 and the A330 Multi-Role Tanker Transport.

EADSY has a long-term earnings growth rate of 13.9%. The Zacks Consensus Estimate for the company’s 2024 sales indicates year-over-year growth of 5.4%.

Northrop Grumman has several military aircraft that are used in the Asia-Pacific region. The company has supplied the F-35A, F-20 and RQ-4B Global Hawk, used by Japan and South Korea.

Northrop has a long-term earnings growth rate of 8.7%. The Zacks Consensus Estimate for NOC’s 2024 sales implies an improvement of 5.4% from the prior-year figure.

LMT Stock Outperforms Industry
 

In the past six months, shares of Lockheed Martin have risen 30.4% compared with the industry’s growth of 3.3%.

Zacks Investment Research
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LMT’s Zacks Rank
 

LMT currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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