Light at the End of Lockheed's Tunnel

With the defense world being rocked by massive cuts and rumors of more to come, sometimes it's nice to get a little good news. Enter Lockheed Martin's (NYS: LMT) next-generation Global Positioning System.

A step in the right direction
As of Oct. 10, Lockheed has turned on the initial power to its GPS III Non Flight Satellite Testbed (GNST). This is a major milestone in meeting the scheduled launch date of 2014, and it's also a step in the right direction for a company's that's been plagued with Pentagon discontent over the continuing delays and costs associated with its F-35 contract.

More good news? Lockheed has placed a premium on affordability and is first developing the GNST -- a full-sized prototype of the GPS III spacecraft -- just to identify and solve potential problems with the first space vehicle. The goal is to reduce risk, increase mission assurance, improve production predictability, and lower overall costs -- music to budget-cutting, congressional ears.

It's gonna be a bright, bright, sunshiny day
Although there's still a lot of work to be done on the GPS III, Keoki Jackson, Lockheed's GPS III program director, has gone on record to say: "Together with the Air Force, we continue to meet major program milestones on or ahead of schedule and we are committed to delivering GPS III spacecraft affordably and efficiently. Our progress on the GNST is already saving the program money, eliminating risk early and providing highly reliable mission assurance for GPS constellation sustainment."

At a time when defense contractors such as Boeing (NYS: BA) , United Technologies (NYS: UTX) , and General Dynamics (NYS: GD) are looking at ways to cut costs to win stakes in the shrinking pool of defense contracts, Lockheed looks as if it's found the magic formula -- or at least it has for this contract. And with the Pentagon becoming ever more scrutinizing of defense players and their often astronomical cost overruns -- did someone mention Boeing's KC-46 tanker contract? -- a company that comes in on time and under budget is going to have a leg up on its competition -- great news for defense shareholders praying their favorite defense stock pulls through.

What this means for the future
Defense contracting has been hit hard, and the hits are not letting up anytime soon. But news like this suggests that Lockheed appears to be getting its act together. Here's hoping this step is an example of what's to come and is followed by the rest of its contracts. Let's face it: Lockheed could use a win, but then again, so could defense contractors in general.

Looking for other defense companies to invest in? The Motley Fool's free report "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke" highlights two small-cap stocks that have solid deals with the government and have the potential to deliver multibagger returns. Access your free report today!

At the time thisarticle was published Light at the End of Lockheed's TunnelLight at the End of Lockheed's TunnelFool contributor Katie Spence loves good news. She owns no shares of any company mentioned here. You can follow her on Twitter, where she goes by @TMFKSpence.The Motley Fool owns shares of Lockheed Martin and General Dynamics. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.