There's a storm cloud on the horizon, and unless I miss my guess, it's about to start raining profits for Lockheed Martin
A little more than two years ago, we saw the lightning flash as rumors swirled concerning a multi-dozen-plane order from Israel. This week, the thunderclap arrived -- Israel named the F-35 its official "Next-Generation Fighter" and signed a letter to start the process of buying the fighter jets for its Air Force.
No huge surprise there, of course. Ever since Boeing
How big is this deal for Lockheed -- and, lest we forget, for competing F-35 engine builders General Electric
Initially, Israel will spend $1.8 billion to acquire 19 F-35 fighters at about $96 million a pop. Associated flight simulators, spare parts, and maintenance services will increase the per-plane cost to nearly $145 million. Eventually, the Israelis say they might need $15.2 billion worth of hardware and ancillary services -- which my calculator tells me results in a total buy order as big as 105 planes. For context, that's nearly as many airplanes as Great Britain has ordered for its navy -- and Britain is the sole "level 1" partner on the project! It's also a number 40% above the best-case scenario that was floated back in 2008, when Israel first expressed interest in the plane.
Foolish takeaway
In the halls of the Pentagon, talk today is all about cutting, slashing, and then trimming the defense budget some more, and this talk has had the expected effect on Lockheed's stock price. But Israel's rising interest serves as a welcome reminder for investors: Just like its planes, Lockheed's stock can also go up.
Make The Motley Fool your source for all things investing in general, and defense investing in particular. Read all about:
- How Lockheed got its wings clipped.
- How Boeing bagged one of the biggest defense orders ever.
- What's next in the Pentagon budget wars.