Lockheed Martin (LMT) Secures $414M Contract For JASSM-ER

Lockheed Martin Corp. (NYSE:LMT) has won a contract from the U.S. Air Force for the production of the 15th lot of Joint Air-to-Surface Standoff Missile-Extended Range (JASSM-ER).

Contract Details

The contract is valued at $413.9 million and was awarded by the Air Force Life Cycle Management Center, Eglin Air Force Base, FL.

Per the contract, Lockheed Martin will supply 360 JASSM-ER missiles and tooling and test equipment.

The work is scheduled to be completed by Aug 31, 2020 and will be executed in Orlando, FL. The contract will use fiscal 2017 missile procurement funds.

JASSM Attributes

JASSM is a stealthy, precision-guided cruise missile with a penetrating blast-fragmentation warhead. These missiles have been designed with infrared seekers and enhanced digital anti-jam Global Positioning System. They are integrated on the B-1, B-2, B-52, F-16 and F-15E jets of the Air Force. They are also carried on the F/A-18A/B and F-18C/D aircraft worldwide. Lockheed has been manufacturing the JASSM cruise missiles in a Troy, AL-based plant since the late 1990s.

JASSM Extended Range – a newer version of JASSM – can also be installed in the F-16 aircraft since they are identical in size and capability. However, JASSM-ER is more fuel efficient and is powered by a turbo-fan engine instead of a turbo-jet engine. It can travel over twice the distance of that of JASSM.

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 division 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.

Again, its business segment, Mission and Fire Control (MFC), recently 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 18.1% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 27.4%. 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. As a result, Lockheed Martin’s performance lagged behind the likes of General Dynamics Corp. (NYSE:GD) , Boeing Co. (NYSE:BA) and Huntington Ingalls Industries, Inc. (NYSE:HII) who 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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