As the world's largest defense contractor, Lockheed Martin derives about 60% of sales from the U.S. Department of Defense, roughly 10% from U.S. government agencies, and nearly 30% from international sales. Lockheed's incumbent position, divestment of noncore businesses, and headcount reductions have enabled it to weather the downturn in defense spending. The company has capitalized off a rebound in defense spending under the Trump administration, and we project at least 5% year-over-year growth in 2019 and 2020.
Aeronautics, which we forecast at just under 40% of 2019 revenue, houses fighter aircraft such as the F-22, F-35, and F-16, as well as transports like the C-130J. Total F-35 quantities are projected at just over 2,400 for the U.S., versus an original baseline of about 2,800. At the end of 2018, Lockheed had delivered over 350 F-35s. Despite incessant headlines targeting the program's cost and performance, we view the F-35 as a growth and profit driver. Buys may be stretched out over the next decade, as the Department of Defense attempts to contain annual outlays for the program but we don't think large cuts in total F-35 production will occur. By 2020, we project the F-35 accounting for 31.5% of total revenue.
Rotary & mission systems will account for roughly one quarter of 2019 sales; this segment focuses on combat ships and naval electronics, and the 2015 acquisition of Sikorsky expands this business into helicopters. We believe Sikorsky will continue to face headwinds in its commercial business but the transition to production on military programs in 2020 and beyond should boost growth. The remaining two segments, missiles & fire control and space systems, compose just over 30% of sales. Missiles & fire control is benefiting from Department of Defense investments in missiles and will be the fastest growing unit through 2021.
We like Lockheed's portfolio of franchise programs, combined with its solid management team, which continues to focus on returning excess cash to shareholders. We believe U.S. defense outlays, which lag the budget, will continue to grow over the next few years and that wide-moat Lockheed is well-positioned to capture this upcycle.
Decades of experience dealing with arcane government regulations coupled with a leadership position in high-tech areas such as combat aircraft, transports, missiles, and helicopters, provide Lockheed with strong intangible assets and lock its customers into long-term relationships with the company. In many instances, the U.S. Department of Defense has no choice but to use Lockheed because there are no other qualified bidders. In missiles, Lockheed and Raytheon effectively compete in a duopoly with other players only capturing a small portion of the U.S. market. In certain segments, such as manned combat aircraft, where we believe Lockheed will be the sole U.S. supplier by 2025, the company enjoys efficient scale dynamics. These intangible assets, customer switching costs, efficient scale in certain segments, and historical returns well above its cost of capital and above peers lead us to assign Lockheed a wide moat rating.
We think Lockheed's wide moat is particularly strong in its aeronautics segment, which generates just over 40% of Lockheed's revenue and houses the F-35. Here, the company benefits not only from intangible assets it is building by developing the largest aircraft program ever, but also from switching costs and efficient scale. The sheer complexity of designing three different aircraft variants for the Air Force, Navy, and Marine Corps with stealth characteristics, high-end avionics, and an integrated digital logistics system cannot be underestimated. The F-35's avionics require 24 million lines of code; the venerable F-16, which is still in service, required only 135,000 lines.
The technical expertise Lockheed builds through development of the F-35 creates intangible assets for the firm and a more subtle source of moat for the unit: efficient scale. By the middle of the next decade, Lockheed will be operating the only hot manned combat aircraft manufacturing line in the U.S. and perhaps the entire Western world. While the increasing use of unmanned systems will eventually overtake manned aircraft, we still expect demand for manned fighters to remain robust through 2030.
Finally, thanks to commonality issues, training costs, and the mission-critical nature of fighters, customer switching costs will grow as the U.S. Department of Defense and international militaries accept ever-increasing deliveries of the F-35 aircraft. The Aviation Week Intelligence Network forecasts that Lockheed will account for more than 60% of the value of fighter aircraft production between 2016 and 2020, reflecting its already dominant position, which is set to grow. By 2020, the F-35 will account for about 75% of the aeronautics segment's revenue and roughly 30% of Lockheed's total revenue. In addition to the F-35 program, the company continues to capture new orders for its C-130J, which is the only remaining U.S. produced military transport aircraft with a hot production line.
Lockheed's next-largest operating segment, rotary & mission systems, also enjoys a wide moat, thanks primarily to its recent acquisition of Sikorsky, which accounts for roughly 40% of this segment's revenue in 2016. Leveraging its franchise position on the UH-60 Black Hawk helicopter for the U.S. military, Sikorsky built itself into a global leader for military rotorcraft. Over the next 15 years Forecast International pegs Sikorsky's global market share in value terms--excluding Russian manufacturers--at approximately 30%, representing a value of $43 billion. Boeing, the next largest military helicopter manufacturer, is projected to capture 16% of the market over this time period. Sikorsky derives its leading position from intangible assets built up over decades of experience working with the U.S. military and reinvests in its business to strengthen these intangible assets. In addition, Sikorsky leverages military technologies underwritten by the U.S. government in the commercial market, further strengthening its edge in intangible assets over competitors.
Sikorsky's installed base of more than 2,000 UH-60 helicopters with the U.S. military creates high switching costs. Moving to a different product would require costly retraining of pilots, a complete overhaul of concepts of operations and warfighting doctrines, and a new logistics tail. Evidence of these switching costs can be found in the numerous upgrades that the UH-60 has gone through over the years, enabling the U.S. Army to operate the model for over three decades. The new CH-53K helicopter for the Marine Corps, which is a heavily upgraded variant of the existing CH-53E helicopter, is an example of how Sikorsky leverages its existing position to gain future growth opportunities.
To be sure, Sikorsky faces stiff competition from Airbus Helicopters, Augusta Westland, and Bell in its commercial business, and growth headwinds will persist over the near term because of the recent drop in oil prices, which limits demand for its S-92 helicopter designed for the offshore oil and gas market. However, Sikorsky's bailiwick remains its military business, and we estimate that commercial sales are now well below one quarter of revenue, a percentage that will continue to drop as the CH-53K ramps up. The rotary & mission systems business also provides complex systems to the U.S. Navy onboard its ships, where its only significant competitor is Raytheon's Integrated Defense Systems unit. In addition, this operating segment remains one of only two contractors currently delivering smaller and more agile next-generation littoral zone combat ships to the U.S. Navy.
Lockheed's missiles & fire control segment competes in a duopoly with Raytheon in U.S. missile production, reflecting the high degree of technical know-how required to manufacture and integrate missiles on board ships, aircraft, and ground-based missile delivery systems. Internationally, Lockheed, Raytheon, and MBDA--a European joint-venture company--effectively split the global market. Moreover, the mission-critical nature of missiles and munitions--the customer's need for the product to function as promised is quite high--translates into high switching costs and customers' reluctance to go with an unproven supplier, despite the perishable nature of these products.
The space systems business--which accounts for about 18% of revenue--manufactures satellites, nuclear ballistic missiles, and missile defense systems. The business also provides space-launch services through its United Launch Alliance joint venture with Boeing. Although segments of the space market appear ripe for disruption, as evidenced by the entrance of SpaceX and Blue Origin in space launch and various firms in satellites, we maintain that Lockheed enjoys a narrow moat in this business.
First, the bulk of Lockheed's business in this segment, over 50% of revenue, remains focused on providing satellites to the U.S. Department of Defense. These satellites are often classified because of their advanced technologies and secretive missions, which creates a regulatory barrier to new entrants and startups. In addition, the requirement for the satellite to work as required once in orbit creates a customer that prefers contractors with a long record of successful performance like Lockheed.
Second, roughly 30% of space systems' business is related to its nuclear ballistic missile and missile defense work, which focuses on highly classified and bespoke nuclear missile work.
The remainder of space system sales, around 15%-20%, lies within space-launch services. Here, we acknowledge the growing threat from new entrants such as SpaceX and Blue Origin, which offer launches for a lowers price than Lockheed's United Launch Alliance joint venture with Boeing. While the launch business enjoys a narrow moat thanks to its entrenched position with the U.S. Air Force, the moat trend is decidedly negative.
We are incresing our fair value estimate for Lockheed Martin to $385 from $384 per share to reflect an improved near-term tax situation resulting from the foreign derived intangible income deduction. Our expectations for revenue and margin were too modest in nearly every segment. The F-35 program remains the valuation driver for Lockheed, and we forecast it accounting for over one quarter of the company's consolidated operating profit by 2023.
We model about 10% and 6% year-over-year respective revenue growth in 2019 and 2020. The F-35 remains a growth driver, but missiles & fire control will be the fastest growing business through 2020. We anticipate Lockheed growing at an average rate of just above 5% from 2019 to 2023. While we still think the defense budget will end up disappointing post-2021, increases in defense spending will continue through the fiscal 2020 government budget and this will insulate the F-35 from cuts and drive growth in other Lockheed businesses. We expect Lockheed will deliver 130 F-35s in 2019. Management projects that it will peak at roughly 160 F-35 deliveries in 2023, but we expect deliveries to top out slightly below this. Thanks to the F-35, we project the aeronautics segment going above $25 billion by 2022.
We anticipate margins to move up as F-35 unit costs fall but pricing doesn't drop by quite as much, and higher margin services on the program ramp from around $3 billion today to over $5 billion by middle of next decade. We also anticipate margin expansion at rotary & mission systems. Segment margins (before pensions and corporate items) will land at 11.5% in 2023 up from 10.9% in 2018. The FAS/CAS operating pension adjustment will remain positive for the foreseeable future, helping buoy operating margins at the company level but it will taper off, creating a margin headwind in the later years of our forecast. We're forecasting consolidated GAAP operating margins be just over 14% in all five of our discrete Stage 1 projected years. Our midcycle forecast calls for F-35 operating margins of around 12%, combined with a rebound in Sikorsky's margins and a better business mix thanks to the divestment of services work.
Despite retiring risks on the F-35, the production phase of the program still presents challenges. Delays, sub par initial performance, and other negative headlines may undermine the program's profitability if these reports affect eventual procurement volume or pricing, which in turn can raise unit costs. More broadly, the trajectory of U.S. defense spending and whether the company's programs are fully funded represent the most significant risks to Lockheed's business. Lockheed derives roughly 60% of its revenue from the U.S. Department of Defense. We still believe that the long list of systems the U.S. Department of Defense wants to procure won't all get fully funded due to budget constraints and increasing U.S. federal government deficits next decade, and that while total F-35 production won't change, annual buys may get stretched out.
Nearly all U.S. defense contractors use long-term contract accounting, and Lockheed is no exception. Lockheed uses the percentage-of-completion method and typically uses costs incurred to date (cost-to-cost basis) to calculate the amount of revenue it recognizes. This percentage-of-completion approach requires significant judgment about revenue, costs, anticipated award incentives from the government, potential penalties, and a host of other factors. This means profit and loss may not accurately reflect future cash flows.
Government contracting approaches affect defense industry profitability. In the 1960s, heavy use of cost-plus contracts during the preceding decade led the Department of Defense to pursue fixed-price development contracts on a host of other programs. The result was several contractors nearly going bankrupt. A similar story played out in the late 1980s. In 2007, Congress made fixed-price contracts the standard unless technical risk made cost-based contracting necessary. Thus, cost overruns remain a headline risk that could affect industry profitability through stricter contracting.
We rate the company's stewardship of capital as standard. Marillyn Hewson became CEO in January 2013, taking over from long-serving CEO, Robert Stevens. Prior to taking her CEO role, Hewson held 18 different leadership roles at Lockheed, including in the electronics systems, aeronautics, services, and logistics businesses and the internal auditing division. Her 30 years of experience at Lockheed across multiple businesses provides her with a deep understanding of its history and culture, along with its relationships with its various U.S. and international customers.
Similar to other defense firms, Lockheed's double-digit operating margins combined with limited working capital demands thanks to customer advances and relatively low capital expenditures, means it can return significant cash to shareholders. Lockheed has driven its share count to under 300 million diluted shares outstanding, hitting this target at the end of 2016, a year earlier than previously expected. Shares have fallen by more than 30% from over 400 million in 2008. The company has also ratcheted up its dividend payout ratio. We expect Lockheed to continue to return well over its target of at least 50% of free cash flow (operating cash flow less capital expenditures) to shareholders via dividends and share repurchases and forecast dividend growth each year through 2023.
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