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Lockheed Martin (LMT) Unit Wins Three Deals Totaling $64M


Lockheed Martin Corp.’s LMT business unit, Rotary and Mission Systems, has won three modification contracts, totaling $63.9 million, from the U.S. Navy.

Contract Details

The first contract, valued at $27 million, involves procurement of 11 standard and five SEED retrofit kits in support of the H-60 Automatic Radar Periscope Detect and Discrimination program. Scheduled to be completed by October 2020, majority of the work will be performed in Farmingdale, NY and the rest will be carried out across various locations in the United States.

The second contract was awarded to support the Navy and the governments of Australia as well as Denmark. Per the deal, worth $23.1 million, Rotary and Mission Systems will procure non-recurring and recurring efforts that are necessary to produce, test and deliver 69 Generation VI Mission Computers, 87 Moving Map Integration Retrofit Wiring Kits (Navy, Australia, and Denmark), and 24 Audio Management Lite Computers for the MH-60R/S platform.

This contract includes 92% of the purchases for the Navy, 6% for the government of Australia and 2% for the government of Denmark, under the Foreign Military Sales program. Scheduled to be completed by February 2020, majority of the work will be performed in Owego, NY and the rest will be carried out across various locations in the United States.

The third contract is valued at $13.8 million. Per the deal, Lockheed Martin will exercise an option for material, travel, subsistence and support of the Integrated Submarine Imaging Systems program. Work is scheduled to be completed by September 2018. While majority of the work will be performed in Manassas, VI, the rest will be carried out across various locations in the United States.

Our View

Lockheed Martin's Rotary and Mission Systems business carries out some of the company's high-profile programs. These include the Aegis Combat System, Littoral Combat Ship, MH-60 helicopter avionics along with military and commercial orders. The segment generated revenues of $3.4 billion in the second quarter of 2017, reflecting almost 27% of its total revenue.

Coming to order growth for this segment, its Sikorsky business line secured a $3.8 billion five-year contract for supplying 257 Black Hawk helicopters to the U.S. Army as well as to the Saudi Arabian National Guard, in the second quarter.

Markedly, being the Pentagon’s prime defense contractor, Lockheed Martin enjoys a lion’s share of the aerospace-defense industry in the United States.

Moreover, the budget proposal of $13.5 billion in addition to $25 billion that came from President Trump for core Defense Department programs for the current fiscal year has been allocated for a number of defense equipments. We believe that if this proposal gets approved it will surely boost Lockheed Martin’s revenue growth, going forward.

Considering the aforementioned developments, the company is expected to win more of such contracts in days ahead, given that most of its programs are the top priorities of Pentagon.

Price Movement

Lockheed Martin’s stock was up about 26.8% in the last one year, underperforming the broader industry’s gain of 39.1%. This could have been caused by the intense competition that the company faces for its broad portfolio of products and services domestically as well as internationally.

Also, the stock’s performance lags compared with that of The Boeing Co. BA, Airbus Group SE EADSY and Leidos Holdings, Inc. LDOS, which surpassed the industry mark.

Zacks Rank

Lockheed Martin currently carries 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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