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An $11 Billion Contract Would Be Just the Boost This Company Needs

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Lockheed Martin's (NYSE: LMT  ) F-35 fighters keep getting hit with cost increases and schedule delays, causing many to wonder just how many F-35s are actually going to make it into the air. Even though one version of the jet, the F-35B, recently completed initial carrier flight tests, astronomical cost overruns forced former Defense Secretary Robert Gates to put the Marine Corps plane on a two-year probation -- not great news for Lockheed.

Perhaps even more problematic is that the F-35's recent $900 million increase and schedule delays have further opened the door for competitor Boeing (NYSE: BA  ) to start touting the "reasonable price" of its F-18, which, Boeing adds, is "available for almost immediate sale."

Silver lining for Lockheed?
With all the doom and gloom surrounding Lockheed's F-35, it may be tempting for Lockheed to get nervous about the state of the F-35 program. However, the DOD's recent announcement regarding its willingness to sell F-35s to New Delhi may be the breath of fresh air Lockheed needs.

Although India has not expressed specific interest in the F-35, it has rejected two older U.S. warplanes, the F-16 and the F-18, leaving room for the F-35 to swoop up the $11 billion fighter jet contract.

Robert Scher, deputy assistant secretary of defense for South Asia, has gone on the record to say, "The F-35 is something that we would be more than willing to talk to the government of India about should they request to find out more information about purchasing it."

Don't count your chickens just yet
Right now, the talk of selling F-35s to India is just that: talk. Still, if India does express interest in the F-35, the DOD's willingness to sell the F-35 is great news for Lockheed and its subcontractors on the project: Northrop Grumman (NYSE: NOC  ) , BAE Systems, and United Technologies (NYSE: UTX  ) , which is supplying the engine for the F-35 through its subsidiary Pratt & Whitney. And let's face it, any good news for defense contractors is more than welcome at a time when massive budget cuts are hurting stock prices.

Not ready to give up on defense stocks? Looking for defense companies that can't be beat? The Motley Fool's free report "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke" details two small-cap stocks that have solid deals with the government and have the potential to deliver multibagger returns. Click here to access your free report today!

Fool contributor Katie Spence likes cupcakes. She owns shares of Northrop Grumman. She does not own shares of any other company mentioned above. Follower her on Twitter by clicking @TMFKSpence. The Motley Fool owns shares of Northrop Grumman and Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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10/24/2016 4:01 PM
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