Lockheed Martin Wins $1.1B Deal To Procure CH-53K Aircraft

Lockheed Martin Corp.’s (NYSE:LMT) business unit, Sikorsky, recently secured a modification contract for procuring 12 CH-53K aircraft from the Lot II and Lot III of the jet’s low-rate initial production. The deal was awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Valued at $1.1 billion, the contract is expected to be complete in December 2023. Apart from procuring the jets, Sikorsky will offer programmatic support, logistics support and peculiar support equipment.

Majority of the work related to the deal will be executed in Stratford, CT, and Wichita, KS.

A Brief Note on the CH-53K Program

The CH-53K helicopter advances Sikorsky’s 50 years of manufacturing and operational success with its CH-53A, CH-53D/G and CH-53E predecessors. The new heavy lifter allows the U.S. Marine Corps and international militaries to move troops and equipment from ship to shore and to higher altitude terrains more quickly and effectively. It is also effective for handling missions like humanitarian aid, troop transport, casualty evacuation, support of special operations forces, and combat search and rescue (CSAR).

What Favors Lockheed Martin?

In recent times, military helicopters in the U.S. aerospace-defense market have gained prominence and significant traction due to advancements and integration of new tactical, logistical and other important features. Some of these developments have also been made by Lockheed Martin, paving the way toward securing valuable helicopter-related contracts in recent times.

Such contracts are indicative of solid revenue growth prospects for the company’s Rotary and Mission Systems (RMS) business segment, which comprises the Sikorsky helicopters. Evidently, during first-quarter 2019, revenues at Lockheed Martin’s RMS unit increased a solid 17% year over year, with its Sikorsky helicopter programs being one of the primary growth contributors.

As the latest defense budget proposal for fiscal 2020 offers investment potential worth $57.7 billion in Aircraft, including $0.8 billion for Sikorsky VH-92, we may expect Lockheed Martin’s RMS unit to obtain consistent order flows from the Pentagon like the latest one. This, in turn, should lead to similar top-line growth for the unit in the coming days.

Price Movement

In a year’s time, shares of Lockheed Martin have gained 4.2% against the industry’s 4.3% decline.

Zacks Rank & Other Key Picks

Lockheed Martin currently carries a Zacks Rank #2 (Buy). A few other top-ranked companies in the same space are Leidos Holdings, Inc. (NYSE:LDOS) , Northrop Grumman Corp. (NYSE:NOC) and Wesco Aircraft Holdings, Inc. (NYSE:WAIR) , each carrying a similar rank like Lockheed Martin. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 1.1% up to $4.58 over the past 60 days.

Northrop delivered average positive earnings surprise of 18.50% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 1.8% to $19.29 over the past 90 days.

Wesco Aircraft’s long-term growth estimate currently stands at 12%. The Zacks Consensus Estimate for 2019 earnings has moved 3.7% north to 84 cents over the past 90 days.

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