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By Keith Schoonmaker, CFA | 01-29-2010 07:45 AM

Flight Path for Lockheed Martin

Analyst Anil Daka on how budget issues, the F-22 grounding, and drones affect the outlook for this wide-moat defense contractor.

Securities mentioned in this video
LMT Lockheed Martin Corp

Keith Schoonmaker: Hello, I'm Keith Schoonmaker with Morningstar. I'm here today with our Lockheed analyst, Anil Daka. Anil, would you give us your general thesis on Lockheed?

Anil Daka: Sure. Lockheed Martin, as the largest defense contractor in the United States, is dependent on the defense budget to get its revenues. And defense budgets, we think, are going to stay stressed because the U.S. government is going to spend increasingly larger amounts on Social Security, Medicare, and other benefits, and with the foreign interest payments.

But that said, Lockheed has a very diverse platform, so it should withstand some budgetary disruptions. And along with that, it also has fast-growing programs, like the F-35, which should help it balance should there be any other problems with programs.

Schoonmaker: Anil, we've heard in the media recently that the F-22 was canceled. Can you give us an idea of how the F-22 and F-35 relate to each other?

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