Lockheed Martin Corp. (NYSE:LMT) recently secured a $561.8-million foreign military sales (FMS) contract for the production of Army Tactical Missile System (ATACMS). The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.
Work related to the deal is scheduled to be completed by Jun 30, 2022, and will be performed in Grand Prairie, TX; Camden, AR, and other locations across the United States. The missiles will be delivered to Bahrain, Poland and Romania.
A Note on ATACMS
Lockheed Martin’s ATACMS is a long-range guided missile, capable of striking targets well beyond the range of existing Army cannons, rockets and other missiles. The ATACMS long-range guided missiles can be fired from multiple rocket launchers, including the M270 Multiple Launch Rocket System (MLRS) and the M142 High Mobility Artillery Rocket System (HIMARS).
Our View
In recent times, geo-political tensions across the Middle East rose on possible Iranian expansionism in the region. Additionally, growing political unrest between Bahrain and Iraq has also triggered tensions alarmingly in the region, which has induced these nations to strengthen their defense arsenals further.
Moreover, tensions between the United States and Iran have heightened, led by the recent Iranian attacks on an American drone. At the same time, we are witnessing political unrest in Europe, led by strained relations between Russia and eastern European nations, such as Ukraine, Poland and Romania. This has increased the demand for missile systems, fighter jets and military helicopters particularly in these European nations.
Such widespread unrest has set the stage for Lockheed Martin, Pentagon’s largest defense contractor, to win an increasing number of contracts, worldwide. This rise in demand has boosted the company’s overseas business. The latest contract win is a testimony to that.
As a result of this, Lockheed Martin's Missiles and Fire Control (MFC) business segment, which produces top-notch missiles like Patriot Advanced Capability-3 (PAC-3) missiles and THAAD intercept systems, continues to generate notable revenues. This is evident from the segment’s first-quarter results, which generated 40% year-over-year sales growth.
Fiscal 2020 Defense Budget to Aid
The U.S. government proposed the fiscal 2020 defense budget in March 2019, under which the Department of Defense will receive $718 billion, reflecting a 4.9% increase from the prior-year budget. This budget includes an increased spending plan of $13.6 billion on missile systems. Once approved, the increased spending provision should usher in more contracts for Lockheed Martin’s missile programs.
Price Performance
Shares of Lockheed Martin have gained 21.7% in the past twelve months compared with the industry’s growth of 9.6%.
Zacks Rank & Other Key Picks
Lockheed Martin currently carries Zacks Rank #2 (Buy).
A few similar-ranked stocks in the same industry are Wesco Aircraft Holdings (NYSE:WAIR) , Northrop Grumman Corp. (NYSE:NOC) and Leidos Holdings (NYSE:LDOS) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wesco Aircraft’s long-term growth estimate currently stands at 12%. The Zacks Consensus Estimate for 2019 earnings has increased 3.7% to 84 cents in the past 60 days.
Northrop Grumman came up with average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 2.26% to $19.42 in the past 60 days.
Leidos Holdings came up with average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.54% to $4.60 in the past 60 days.
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Lockheed Martin Corporation (LMT): Free Stock Analysis Report
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Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report
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