News of a strengthened business tie-up with an important partner overseas gave some lift to Lockheed Martin (NYSE: LMT) stock on Tuesday. The defense company went on the offense, with its shares climbing to a nearly 3% gain on the day. That looked particularly good next to the S&P 500 index, which sank by more than 0.8% that trading session.
Strengthening ties with a long-standing partner
Lockheed announced that it and Korea Aerospace Industries (KAI) have signed a memorandum of understanding (MOU) to expand their existing aircraft development partnership. The MOU covers the manufacturing of rotorcraft and the development of space systems and uncrewed aerial vehicles (UAVs), among other projects.
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The agreement marks the latest move in what’s been a 30-plus-year collaboration between Lockheed and KAI. The two companies originally partnered on the licensed production of the F16 fighter aircraft.
In its press release touting the news, Lockheed quoted its chief operating officer, Frank St. John, as saying that the new pact “reflects our commitment to advancing global security by partnering with U.S. allies to develop, manufacture and sustain 21st century deterrence solutions.”
The company did not provide any financial details about its arrangement with KAI.
The timing is right
A typical MOU has less heft and power as a contract; however, this one is meaningful because it spells out how Lockheed and KAI will expand their already close collaboration. With global tensions rising, now is an ideal time for defense companies to strengthen alliances. That goes double for the Korea Aerospace Industries, which has been frozen in an edgy, North-South standoff for over seven decades.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
