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Lockheed Martin (LMT) Secures $472M FMS Contract for GMLRS

Zacks

Lockheed Martin Corp.'s LMT business unit, Missile and Fire Control (MFC), has won a foreign military sales (FMS) contract from the U.S. Army to produce the 12th Lot of Guided Multiple Launch Rocket System (GMLRS). The contract is valued at $471.7 million.

Contract Details

Per the terms, the contract covers purchase of 2,868 rockets for alternative warhead; 648 rockets for unitary warhead; 370 pods for low-cost reduced-range practice rocket. Lockheed martin will also provide integrated logistics support.

The contract includes FMS to Finland, France, Germany, and Singapore.

The work is scheduled to be completed by Jul 31, 2019, and will be executed in Grand Prairie, TX. The contract will use fiscal 2017 other funds.

GMLRS Attributes

The GMLRS provides dependable precision strike and continues to exceed operational-readiness requirements. It is specifically designed to destroy high-priority targets at ranges up to 70 kilometers and is employed in both urban and non-urban environments. Irrespective of weather, the long-range rocket delivers precision strike beyond the range of most conventional weapons.

The GMLRS Unitary rocket is successfully meeting the needs of the U.S. Army, the U.S. Marine Corps and British Army artillery units in combat. Also, the program is looking ahead to meet evolving customer requirements by testing new technology in their IRAD-funded GMLRS+ program, which will integrate advanced capabilities that will keep GMLRS the world's premier long-range precision artillery rocket.

Our View

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. Recently, the company’s Aeronautics business segment won a modification contract worth $137.8 million from the U.S. Navy. Per the contract, the defense giant will provide additional funding for affordability-based cost reduction initiatives in support of low-rate initial production of the 9th lot of F-35 Lightening II Joint Strike Fighter.

Moreover, its business segment, MFC secured a modification contract to provide system support for the Terminal High Altitude Area Defense (THAAD) field support contract (TFSC). The contract is valued at $112 million.

Price Movement

Lockheed Martin’s stock was up about 17.1% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 27.8%. This could be because the earlier budget cuts have put pressure on the top line although the present defense budget is more in favor of the sector. We believe that budget deficits and political uncertainty might make future defense budgets vulnerable to cutbacks. Lockheed Martin’s performance also lagged behind the likes of General Dynamics Corp. GD, The Boeing Co. BA and Huntington Ingalls Industries, Inc. HII, which outperformed the industry.



Zacks Rank

Lockheed Martin currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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