Orbital ATK Gets FMS Contract To Supply Sidewinder Motors

Orbital ATK (NYSE:OA) announced that it has received a contract from the U.S. Air Force for production of rocket motors for the AIM-9P missile. This indefinite-delivery/indefinite-quantity contract is estimated to be $67 million, if all options are exercised.

The AIM-9P Sidewinder missile was launched in 1978 and has been upgraded several times to meet the new requirements of the defense force. The latest version of the missile will feature Orbital ATK’s SR116-HP-1 reduced-smoke rocket motor. Orbital ATK’s current Foreign Military Sales (‘FMS’) order to supply Sidewinder missile is expected to run through February 2022.

Foreign Military Sales

Foreign Military Sales provides a new market for the U.S. Defense company, thereby creating fresh opportunities to market their products. FMS allows defense companies to secure new defense deals and keep their contract book ticking in case of a short fall in domestic contracts.

As per Section 3 of Arms Export Control Act, the U.S. may sell defense articles and services to foreign countries and international organizations so long as the President formally finds that to do so will strengthen the security of the U.S. and promote world peace.

Recent FMS Contract for a Peer

Last month, The Boeing Company (NYSE:BA) announced that it has secured a modification contract from the U.S. Army for supplying lot 7-11 of AH-64E Apache (NYSE:APA) attack helicopters to the government of Saudi Arabia. Work related to this multi-year deal is expected to be over by Jun 30, 2022. Valued at $3.28 billion, this foreign military sales (FMS) contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.

Price Movement

In the last three months, Orbital ATK’s shares returned 8.5%, outperforming the Zacks categorized Aerospace - Defense Equipment industry’s gain of 3.1%.

Being the largest manufacturer of small-caliber ammunition for the U.S. Department of Defense, the company is expected to reap the benefits of President Trump’s policies to further strengthen U.S Defense departments.

Zacks Rank

Orbital ATK currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Lockheed Martin Corporation (NYSE:LMT) and TransDigm Group Incorporated (NYSE:TDG)

Lockheed Martin Corporation is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its 2017 Zacks Consensus Estimate moved up by 0.2% to $12.62 per share in the last 60 days.

TransDigm Group is another Rank #2 stock. The 2017 Zacks Consensus Estimate for the company moved up by 0.4% to $11.56 per share in the last 60 days.

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