Lockheed Martin's Unit Wins $80M Missile Deal From US Navy

Lockheed Martin Corp.’s (NYSE:LMT) unit, Rotary and Mission Systems (“RMS”), recently secured an $80-million modification contract to exercise option for Multi-Mission Signal Processor; Ballistic Missile Defense Kill Assessment System 5.1; and AEGIS AMOD Upgrade for DDG-85, DDG-87 and DDG-88. The contract was awarded by the Naval Sea Systems Command, Washington, D.C.

Operations related to the deal will be carried out in Moorestown, NJ; Clearwater, FL and Owego, NY. Lockheed Martin will utilize fiscal 2018 other procurement (Navy); 2018 defense-wide procurement; 2017 other procurement (Navy); and 2012 shipbuilding and conversion (Navy) funds to complete the task. Work related to the deal is scheduled to be completed by August 2020.

A Brief Note on RMS Unit

Lockheed Martin’s RMS segment provides design, manufacture, service and support for a variety of military and commercial helicopters, ships and submarine missions and unmanned and combat systems. In addition, it also offers simulation and training services. Its customers include the U.S. Army and Navy, and various government agencies of the United States and other countries along with commercial customers.

What’s Favoring Lockheed Martin?

Being Pentagon’s largest contractor, Lockheed Martin enjoys a steady flow of contracts from the Department of Defense. The company acquired a massive $3.5-billion deal last month to provide army training solutions.

Lockheed Martin’s RMS segment recorded sales of $4.4 billion in fourth-quarter 2017, which reflected a year-over-year improvement of 14.2%. We believe, the aforementioned contract wins, along with the latest one, will allow this segment to deliver similar notable performance in the days ahead.

Moreover, in February 2018, President Trump proposed fiscal 2019 defense budget that provisions for an investment plan of $6 billion for varied missile programs. Lockheed Martin is expected to gain significantly from this budgetary provision, as it includes an investment plan of $2.8 billion for varied missiles.

The global rocket and missile market is projected to grow at a CAGR of 4.74% during 2017-2022 time frame to reach a value of $70 billion by 2022 (as per Markets and Markets research firm), due to increasing geopolitical conflicts and terrorism. Such projections reflect improved growth opportunities for missile-makers like Lockheed Martin, in the years to come.

Price Movement

Lockheed Martin’s stock has returned about 24.8% over a year, compared with the broader industry’s gain of 43.8%. The underperformance may have been caused by the intense competition that the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically as well as internationally.

Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Huntington Ingalls (NYSE:HII) , Curtiss-Wright Corporation (NYSE:CW) and Northrop Grumman Corporation (NYSE:NOC) . While Huntington Ingalls and Curtiss-Wright sport a Zacks Rank #1 (Strong Buy), Northrop Grumman carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls recorded an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $4.94 to $17.38 in the last 90 days.

Curtiss-Wright delivered an average positive earnings surprise of 15.06% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 60 cents to $5.79 in the last 90 days.

Northrop Grumman posted an average positive earnings surprise of 16.17% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by $1.73 to $15.25 in the last 90 days.

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