The Pentagon has reached a framework agreement with Lockheed Martin Corporation (LMT.US) to accelerate the production of a new type of air-to-air missile.

The Pentagon and Lockheed Martin Corporation (LMT.US) are accelerating production of a new classified air-to-air missile for U.S. Air Force and Navy fighter jets. The company and the U.S. Department of Defense said the two sides have reached a broad framework agreement that will ultimately lead to a multi-year Joint Advanced Tactical Missile (JATM) production contract. The missile is still in development but is nearing the production stage. Once deployed, the missile will become the most advanced air-to-air missile in the U.S. arsenal. That status has long been held by Raytheon Technologies' (RTX.US) continuously upgraded AIM-120 Advanced Medium-Range Air-to-Air Missile (AMRAAM) series, which was introduced in 1993. The Pentagon said in a statement released Thursday that the agreement is critical to ensuring that Lockheed Martin Corporation and the munitions supply chain can make long-term workforce and capacity investments. "We will deliver JATM at the speed required by the nation and its allies, while providing value to taxpayers and shareholders," Tim Cahill, president of Lockheed Martin Corporation's Missiles and Fire Control division, said in the statement. This is the first classified-system framework agreement led by Michael Duffy, the U.S. Department of Defense's top acquisition official. His office has completed framework agreements for several high-profile systems, including the most advanced version of the Patriot surface-to-air missile, the Tomahawk cruise missile, and the interceptor for the Terminal High Altitude Area Defense (THAAD) system. In the Trump administration's budget proposal for the fiscal year beginning October 1, the new missile program received an additional $2 billion in funding, indicating that the program may accelerate production and be deployed soon. The U.S. Air Force and Navy are seeking $2.9 billion for missile development and orders in 2027, compared with just $894 million this fiscal year. A recent Guggenheim report said that, supported by political threats involving GEO Group Inc, weapons stockpile replenishment, and military modernization, defense spending is expected to continue into the next decade, making pullbacks in defense stocks an opportunity to position. Lockheed Martin Corporation initially won the classified development contract in August 2017. The Pentagon also disclosed in March that it would sell 460 missiles and test equipment to Australia for $3.1 billion. The new JATM missile, also known as the AIM-260, is designed to fit inside the internal weapons bays of the F-22 and F-35 fighter jets, but the U.S. Air Force says it can also be integrated onto the F-16 and F-15. In U.S. premarket trading on Thursday, as of the time of writing, Lockheed Martin Corporation and Raytheon Technologies were up nearly 1%.