Lockheed Wins $46M Deal For SBIRS Missile-Warning Satellites

Lockheed Martin Corp.’s (NYSE:LMT) business segment, Space Systems recently secured a modification contract in relation to production of the fifth and sixth Space-Based Infrared System (SBIRS) geosynchronous missile-warning satellites. Work related to this deal is scheduled to be over by Jul 31, 2022.

Valued at $46 million, the contract was awarded by the Space and Missile Systems Center, Los Angeles Air Force Base, CA. Per the terms of the agreement, Lockheed will offer integration of an additional subsystem and propulsion modifications. The contract will utilize fiscal 2017 space procurement funds to complete the work, which will be carried out at Sunnyvale, CA.

A Brief Note on SBIRS

Lockheed’s SBIRS is an orbiting network of satellites that uses infrared surveillance to provide early missile warning for the U.S. military and is considered one of the nation’s highest priority space programs. The system includes a combination of satellites and hosted payloads in Geosynchronous Earth Orbit (GEO) and Highly Elliptical Orbit (HEO), along with ground hardware and software.

SBIRS has powerful overhead sensors that provide vast amounts of data, which is used for operational applications across areas like battle-space awareness, intelligence and 24/7 tactical alerts. With the demand for remote sensing capabilities continuing to rise, the U.S. Air Force’s newly created data-utilization Lab is bringing together the government, the industry and the academia to have a clearer idea how data from satellites like SBIRS can be better applied on and off the battlefield.

Our View

Being the largest defense contractor in the world, Lockheed enjoys a strong position in the satellite manufacturing space, in addition to the other defense equipments that it develops, like fighter jets, missiles and more. In fact, in the fields of imagery, geospatial information and remote sensing, Lockheed Martin has been boosting vital national intelligence systems for more than 30 years.

Notably, during its first-quarter 2017 earnings call, Lockheed raised its 2017 outlook for the Space Systems segment by $25 million, driven mostly by higher expected equity earnings from United Launch Alliance (ULA). ULA is a 50-50 joint venture owned by Lockheed and aircraft major, The Boeing Company (NYSE:BA) , which provides the U.S. government with Atlas and Delta — two cost-efficient families of space rockets. We believe that contracts like the aforementioned one will add further impetus to this segment’s growth rate in the days ahead.

Price Performance

Lockheed’s stock has gained about 16.7% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 24.3%.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. Moreover, the company faces tough competition from other defense giants like Boeing, General Dynamics Corp. (NYSE:GD) and Northrop Grumman Corp. (NYSE:NOC) .

Zacks Rank

Lockheed Martin currently carries 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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