Lockheed Could Gain as Iranian Tensions Escalate

While large defense budget cuts appear in the offing, contractors like Lockheed Martin (NYSE:LMT) and Boeing (NYSE:BA) could benefit from escalating tensions with Iran. Earlier this week, Lockheed won a large missile-system order from the UAE, and could see more orders coming through as the U.S. and Middle Eastern countries amid a military build-up in the Middle-East. Thursday the EU raised the stakes by agreeing in principle to a ban on buying Iranian oil in protest to the country’s secretive nuclear program. ^[1]

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Security in Region Would be a Priority

Since the U.N. report cited that Iran might be engaged in nuclear weapons research, ^[2] friction between Iran and U.S. has only worsened. The ominous development can however, provide a silver lining to U.S. defense contractors that may be see a fall in domestic and European demand in the wake of large spending cuts and austerity measures.

Apart from Lockheed’s THAAD (Terminal High Altitude Area and Defense) deal with UAE, Boeing has also recently received a large order for 84 F-15 jets from Saudi Arabia. ^[3] In a region that is looking increasingly unstable, the U.S. as well as many Gulf states and Israel may look to sign more FMS (Foreign Military Sales) contracts.

We currently have a price estimate of $98 for Lockheed Martin, which is roughly 21% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. EU Moves Forward on Iranian Oil Embargo [↩]
2. U.N. report cites secret nuclear research by Iran, Washington Post, 8th Nov 2011 [↩]
3. Boeing Statement on Saudi Arabia Purchase Agreement, Boeing Investor Relations, 29th Dec 2011 [↩]