Why Lockheed Martin Stock Popped Today

• Lockheed Martin volition triple Patriot rocket accumulation for the Pentagon.

• More rocket income means much revenue, and astir apt astatine higher nett margins.

• 10 stocks we similar amended than Lockheed Martin ›

Lockheed Martin (NYSE: LMT) banal is hopping Tuesday morning, up 3.6% done 10:50 a.m. ET aft announcing a "landmark" declaration to proviso the U.S. Department of Defense with PAC-3 Missile Segment Enhancement (MSE) interceptor missiles -- besides known arsenic the "Patriot."

"This transformative partnership," says Lockheed, volition springiness the institution capable guaranteed request from its lawsuit to alteration the defence elephantine to profitably ramp Patriot rocket accumulation from astir 600 missiles per twelvemonth to 2,000 for the adjacent 7 years.

It gives Lockheed the "long-term request certainty" it needs to warrant making investments successful accumulation capacity. And arsenic this translates into further production, it volition "drive operational efficiencies" that volition little the outgo of each portion of output -- some for the lawsuit and for Lockheed Martin itself.

What does this mean for Lockheed Martin, successful dollars and cents?

Priced astatine $4.2 cardinal per portion currently, PAC-3 MSE is simply a $2.5 cardinal franchise for Lockheed Martin astatine present. Although it seems implied that the accrued accumulation rates volition output little prices for the customer, if 1 were to triple the accumulation complaint and clasp the terms constant, for example, that would turn to $8.4 cardinal annually.

Even for a institution with much than $74 cardinal successful yearly sales, that's a important increase, and capable to "move the needle" connected Lockheed stock, I think. And granted, portion the gross bump mightiness not beryllium rather arsenic ample arsenic I picture above, the information that Lockheed anticipates "operational efficiencies" should astatine slightest mean improved nett margins (and profits) for Lockheed -- and successful a missiles and occurrence power concern conception that is already Lockheed's astir profitable.

This is bully quality for Lockheed Martin stock, and today's terms bump is justified.

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