Defense contractor Lockheed Martin Corp. (NYSE: LMT) received some very good news Tuesday. The company’s F-35A has been declared ready for combat by the U.S. Air Force, and the 34th Fighter Squadron of the 388th Fighter Wing, based at Hill Air Force Base, Utah, has been designated as the service’s first operational F-35A squadron, having met all the established criteria for initial operational capability (IOC).
The Air Force plans to buy 1,773 of the F-35A fighters, and Lockheed can look forward to robust sales to international buyers of the Air Force variant of the plane. The Marine Corps variant of the plane, the F-35B, will achieve its IOC milestone in December, with the Navy variant, the F-35C, scheduled to achieve IOC by February 2019. All told, the services plan to buy 2,443 of the fighter jets.
Air Force Secretary Deborah Lee James said:
Bringing the F-35A to initial combat readiness is a testament to our phenomenal Airmen and the outstanding support of the Joint Program Office and our enterprise partners. This important milestone for our fighter force ensures the United States, along with our allies and international partners, remains prepared to deter, deny, and defeat the full spectrum of growing threats around the globe.
According to a report from Breaking Defense, General Hawk Carlisle, head of the Air Force’s Air Combat Command, said:
My problem is buy rate. We need more faster … . I need more sooner to replace legacy airplanes that are going to require money for service life extensions if I don’t replace them with F-35s. I would like at least 60 a year; 80 would be optimum.
Lockheed expects to build 53 of the jets in 2016 before reaching full production of 17 per month by the end of 2019. Most of the planes will be assembled by Lockheed in its Fort Worth, Texas, facility and others will be assembled at company facilities in Italy and Japan. Each plane includes more than 300,000 individual parts from more than 1,400 suppliers, including Northrop Grumman, BAE Systems and Pratt & Whitney.
Lockheed shares added 1.1% on Tuesday and traded up another 0.2% shortly after Wednesday’s opening bell at $257.61. The stock’s 52-week range is $181.91 to $263.37, and the consensus 12-month price target is $254.83.