Lockheed Martin Wins $382M Navy Deal For MH-60R Aircraft

Lockheed Martin Corp. (NYSE:LMT) recently secured a $382-million contract for the production and delivery of eight MH-60R aircraft. The company will also provide associated systems engineering and program management support.

Details of the Deal

The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Majority of the work related to the deal will be executed in Owego, New York; Stratford, Connecticut and Troy, AL.

The entire task is expected to be completed in September 2020. Lockheed Martin will utilize fiscal 2018 aircraft procurement (Navy) funds for the task.

A Brief Note on MH-60R Aircraft

The MH-60R Seahawk helicopter, also known as the Seahawk Multimission Naval Helicopter, is the world’s most advanced maritime helicopter designed to operate from frigates, destroyers, cruisers and aircraft carriers. The MH-60R is equipped for a range of missions, including anti-submarine warfare, anti-surface warfare, search-and-rescue, naval gunfire support, surveillance, logistics support, personnel transfer and vertical replenishment. Currently, it is operational and deployed with the U.S. Navy as the primary anti-submarine warfare and anti-surface weapon system for Open Ocean and littoral zones.

What Favors Lockheed Martin?

In recent times, the importance of military helicopters in the U.S. aerospace-defense market has gained significant traction due to advancements and integration of new tactical and logistical features along with the inclusion of improved radar systems and the availability of advanced system engineering services. Such crucial developments are boosting the demand for combat helicopters and Lockheed Martin is benefitting significantly being a prominent helicopter manufacturer.

Evidently, during third-quarter 2018, revenues at Lockheed Martin’s Rotary and Mission Systems (RMS) business segment witnessed a 14.4% year-over-year increase, partially driven by higher volume of sales for its Sikorsky helicopter programs. In line with this, we can expect the company’s RMS unit to generate similar top-line growth in days ahead, based on consistent order flows from Pentagon, like the latest one.

Furthermore, the fiscal 2019 U.S. defense budget has provisions for spending $21.7 billion on aircraft. Such budgetary provisions reflect solid growth prospects for Lockheed Martin’s MH-60R program, which, in turn, are likely to boost the company’s profit margin.

Price Movement

Lockheed Martin’s stock has declined 2.3% in the last year against the industry’s growth of 8.7%. The underperformance may have been caused by the intense competition the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically and internationally.

Zacks Rank & Other Key Picks

Lockheed Martin currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the same sector are Aerojet Rocketdyne Holdings (NYSE:AJRD) , Raytheon Company (NYSE:RTN) and The Boeing Company (NYSE:BA) .

While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Raytheon and Boeing carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 in the past 90 days

Raytheon delivered average positive earnings surprise of 6.71% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 1.6% to $10.09 cents in the past 90 days.

Boeing pulled off average positive earnings surprise of 28.01% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 2.9% north to $15.03 in the past 90 days.

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