- The Washington Times - Monday, September 4, 2006

Shares of Lockheed Martin Corp. inched up 1 percent Friday after NASA announced it had awarded the Bethesda company a $3.9 billion contract to build Orion, its next-generation spacecraft.

The stock closed up $1.08 on the New York Stock Exchange Friday to $83.68. The stock markets were closed yesterday in observance of Labor Day.

Lockheed Martin, the world’s largest defense contractor, beat out a team led by Northrop Grumman Corp. to nab a lead role in NASA’s plan to return U.S. astronauts to the moon by 2020.

Before the contract was awarded, analysts largely favored the Northrop Grumman team that included Boeing Co. and had a long track record of building vehicles for manned spaceflights.

The contract represents a second chance for Lockheed, which was chosen by NASA in 1996 to develop a space plane that would replace the shuttle. NASA canceled the program five years later, after the plane failed during testing and after the agency had spent nearly $1 billion.

Merrill Lynch analyst Ronald J. Epstein, whose company has a business relationship with Lockheed, said the deal would not “have significant financial impact although the contract may garner much press and media attention.”

Gary S. Liebowitz, a senior analyst for Wachovia, agreed that Orion would have a “relatively minor” impact on earnings.

“However, it is a good strategic win that should enable the company to grow its NASA business at a time when NASA budgets — other than Orion — are declining,” said Mr. Liebowitz, whose company does banking for Lockheed.

In its most recent financial period, the company reported net earnings of $580 million ($1.34 per diluted share) for the second quarter ended June 30, a 26 percent spike over $461 million ($1.02) a year earlier.

During the quarter, Lockheed’s Space Systems unit reported a 9.4 percent year-over-year growth rate. Space Systems net sales jumped 29 percent because of increases in satellites and strategic and defensive missile systems business.

Howard A. Rubel, an analyst for Jefferies & Co., said the deal is significant for the entire industry.

“The Orion program, more than anything else, could be a safer, more reliable, more cost-effective solution to exploring the heavens,” said Mr. Rubel, who doesn’t own any shares in Lockheed.

Mr. Rubel downplayed any negative effect on Northrop Grumman and Boeing.

“These companies rebound — they have large portfolios, they go through cycles,” he said. “I don’t think you can draw any conclusions beyond this particular event.”

Orion will be capable of transporting a crew of four to the moon and eventually Mars. Its cone-shaped capsule could carry crew members to and from the International Space Station and will be reusable as many as 10 times.

Work on the design and engineering phase of the contract is scheduled to begin by the end of this week and last through September 2013. Lockheed’s partners include navigation systems company Honeywell International Inc.; rocket maker Orbital Sciences Corp.; and Hamilton Sundstrand, a manufacturer of spacesuits, and life-support and power systems.

Contract options for additional vehicles and maintenance, if exercised, could be worth more than $4 billion through 2019.

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