Military

Fighter Deal With Tata Raises Shares of Lockheed and Its Rivals Too

John Harrington

Published: June 19, 2017 11:45 am

Last Updated: January 12, 2020 10:55 am

Lockheed Martin Corp.’s (NYSE: LMT) agreement with India’s Tata Advanced Systems to build F-16 fighter planes in India lifted shares of the Bethesda, Maryland-based aerospace company Monday, but stock in its Lockheed’s rivals got a boost as well.

Shares of Lockheed gained $2.63, or nearly 1%, to $283.74 in late morning trading on the New York Stock Exchange, boosting its market cap to about $82 billion. Boeing Co. (NYSE: BA) caught the updraft as well, rising $2.49, or 1.3%, to $198.93. Northrup Grumman Corp. (NYSE: NOC) gained $1.35 to $259.94. And Raytheon Co. (NYSE: RTN) added $1.08 to $163.64 in late morning trading.

Of the 21 analysts who follow Lockheed, seven have a Strong Buy rating on the shares, two have a Buy rating and 12 have a Hold rating.

Lockheed’s deal with Tata, announced at the Paris Air Show Monday, would be worth billions of dollars and comes at a time when India’s air force is looking to replace hundreds of aircraft in its fleet that had been built by the Soviet Union.

The deal might pose a complication for President Trump, who pledged to create American jobs during the presidential campaign. Prime Minister Narendra Modi, who came into office as an advocate for free market policies, wants the planes built with a local partner to help develop India’s domestic industrial base. Production of the aircraft would be shifted from Lockheed’s plant in Fort Worth, Texas. Lockheed and Tata said shifting the production to India would still retain jobs in the United States.

“F-16 production in India supports thousands of Lockheed Martin and F-16 supplier jobs in the U.S., creates new manufacturing jobs in India, and positions Indian industry at the centre of the most extensive fighter aircraft supply ecosystem in the world,” a joint statement by the companies said.

The announcement of the deal comes a week ahead of Modi’s first meeting with Trump in the United States.

Lockheed said it has produced more than 4,500 F-16s, with more about 3,200 aircraft operational today in 26 countries.