Shares of Lockheed Martin (NYSE: LMT) have been circling $110 for months now, sometimes swinging south, other times veering north, but always tethered by the fear of declining F-16 sales.

In a nutshell, the problem is this: Lockheed beat Boeing (NYSE: BA) to produce the multitalented F-35 Lightning II a couple of years ago. And while a hot new product promises revenue aplenty once the sales cycle begins in earnest, investors fear the near-term effect of buyers "sitting on their wallets," declining to buy F-16 Falcons while waiting for the advent of the F-35.

Fear no more
Yesterday's news suggests those fears may have been overblown. According to reports from both Reuters and AP, the government of recent NATO-admittee Romania is negotiating to buy not one, not two, but four dozen F-16s from Lockheed.

Twenty-four planes would be brand-spanking-new F-16C/D Block 50/52s, powered either by engines from GE (NYSE: GE), or from United Tech's (NYSE: UTX) Pratt & Whitney (so more companies than only Lockheed stand to get a piece of this action). The other 24 would be hot off the lot from "Crazy Eddie's Pre-Owned Fighter Jet Emporium" -- refurbished versions of the older F-16C/D Block 25 model.

Be careful what you wish for
Good news for Lockheed? You can look at it that way, and the news may explain why Lockheed's shares gained some altitude on a generally anemic trading day yesterday. Although Raytheon (NYSE: RTN), L-3 (NYSE: LLL), and Goodrich (NYSE: GR), all of which also stand to get pieces of the contract, were basically flat for the day.

But there's a downside to making the F-16 sale, too -- if Romania buys F-16s today, it may not need to buy F-35s tomorrow.

How much is that downside worth?

  • Price for 24 new and 24 used F-16s: $4.5 billion.
  • Price for 48 of the high-tech F-35s that Lockheed may be selling to Norway this year: Not exactly priceless, but expected to come in close to three times higher at $11.7 billion.

Moral of the story for Lockheed shareholders: Be careful what you wish for.

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