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Lockheed Martin's F-35 A

If I asked you which three defense contracts are currently the most important to Lockheed Martin (NYSE:LMT), what would you say? You'd probably say, and rightly so, the F-35 fighter jet, but beyond that, you might not have an answer -- and that's completely understandable.

With literally thousands of defense contracts out there, it can be hard to keep track of which are the most important for each company. But considering these contracts have a fairly significant impact on each company's bottom line, keeping an eye on a company's biggest defense contracts is a wise move. So to help with that, here are the three most important defense contracts for Lockheed Martin.

3. Mobile User Objective System (MUOS)
According to the U.S. Navy, MUOS is a next-generation narrowband tactical satellite communication system that will allow military men and women to talk to their commanders and one another while on the move. In other words, this system will provide secure, cellphone-like service, no matter where a fighter is deployed. 

Muos

Lockheed Martin's Mobile User Objective System (MUOS) in thermal vacuum chamber (TVAC), September 2011. Image source: Lockheed Martin

However, considering this system consists of a total of six satellites, this is not a cheap program. In fact, when it was last assessed by the Government Accountability Office (GAO) in August 2014, the total program cost for the MUOS system came to just over $7.6 billion, making this the third-biggest defense contract currently on Lockheed Martin's books. 

The good news for Lockheed Martin and its investors is that when the GAO assessed the progress on the MUOS system, it stated that the program's critical technologies were mature (meaning the system had been fully developed and reviewed), and that though there was a delay in one of the launches, a number of satellites had already been successfully launched and were providing improved communication for the military.

Furthermore, on Sept. 2, 2015, United Launch Alliance successfully launched the MUOS-4 into orbit, and on Dec. 3, 2015, the Navy, thanks to its successful completion of on-orbit testing, accepted MUOS-4.   Simply put, the MUOS system is a fairly stable contract for Lockheed Martin.  Unfortunately, the same does not hold true for the next contract on this list.

2. Littoral Combat Ship (LCS)
As I recently detailed, although Lockheed Martin's LCS seaframe program is finally making headway, in the past it's been plagued with cost overruns, design flaws, and multiple -- and fairly significant -- failures. Indeed, the LCS has been so troubled that the Secretary of Defense cut the planned LCS procurement from 52 to 32, and directed the Navy to look for possible alternatives for ships 33-52. 

Lcs On Ocean

The Littoral Combat Ship USS Freedom (LCS 1). Image source: U.S. Navy photo by Mass Communication Specialist 3rd Class Ignacio D. Perez. 

The good news for Lockheed Martin, however, is that although it's faced significant challenges, and then cuts, the LCS contract is still worth a great deal to Lockheed Martin's bottom line. In fact, according to the GAO's latest assessment, the total program cost for the LCS seaframe program is just over $21.3 billion. (Keep in mind that Lockheed Martin and Austal USA are splitting this contract, as both make LCS seaframes.) Consequently, the LCS seaframe contract is currently Lockheed Martin's second-biggest contract. 

Unfortunately for investors, while Lockheed Martin has seen progress on the LCS, there is still a long way to go with this contract and considerable hurdles to overcome. As such, this is a contract investors should closely monitor.

1. F-35 Joint Strike Fighter Jet
When it comes to defense contracts, nothing beats the infamy of Lockheed Martin's F-35 fighter jet contract. Yes, this is a program that's popular for all the wrong reasons -- billions over budget, a decade behind schedule, and too many technical problems to list. 

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Sailors transport an F-35C Lightning II carrier variant joint strike fighter. Image source: U.S. Navy photo by Mass Communication Specialist Seaman Anderson W. Branch. Branch/Released.

But let's get real here for a second, shall we? This is a fifth-generation fighter jet. That Lockheed Martin (along with its subcontractors) is building from the ground up. This isn't a cellphone, or a new watch; this is a highly sophisticated war machine that's forging new ground on what a fighter is capable of. Does that excuse Lockheed Martin's foibles? Absolutely not. But it should help keep things in perspective when evaluating the overall picture.

Speaking of the overall picture, the good news for Lockheed Martin and its investors is that when it comes to lucrative contracts, no defense contract is bigger than the F-35, with a price tag of almost $339 billion according to the GAO.  It's so big, in fact, that according to its latest quarterly report, F-35 sales accounted for approximately 20% of Lockheed Martin's total consolidated net sales both for the quarter and for the nine months ending Sept. 27, 2015. 

Because of this, when it comes to defense sales, no other contract has as big of an impact on Lockheed Martin's bottom line. And this may prove problematic, because according to the GAO's latest assessment, the F-35 still faces significant challenges. Indeed, as of January 2015, less than 40% of the program's critical manufacturing processes were mature, and software development and testing remained a significant risk.  

The good news, however, is that the GAO found that eight of the program's nine critical technologies were considered fully mature. Plus, it found that the program was making slow but steady progress. In brief, this is Lockheed Martin's biggest contract by far, and while it could make a killing from F-35 sales, there is a fair amount of risk still associated with this program. Consequently, investors should keep close tabs on the F-35 but also should remember that this is a next-gen fighter and there are inherent risks with anything that pushes the boundary to this extent.

What to watch
The above three defense contracts have the biggest impacts on Lockheed Martin's bottom line, but that does not mean you should invest in Lockheed Martin based solely on them -- as I recently wrote,  it's important to look at the overall picture. However, because of their size, keeping an eye on those contracts' progress, as well as on Lockheed Martin's backlog, will give investors a more informed investing thesis. Moreover, by keeping close tabs on its biggest contracts, Lockheed Martin investors can spot possible trends -- whether positive or negative -- before they impact the company's stock price.

Katie Spence has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.