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Lockheed Martin (LMT) Wins $55M Deal for CH-53K Aircraft
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Lockheed Martin Corp.’s (LMT - Free Report) Sikorsky Aircraft Corp. has won a modification contract from the U.S. Navy to provide the long lead items in support of low-rate initial production of four Lot II CH-53K aircraft.
Contract Details
The contract is valued at $55 million and was awarded by the Naval Air Systems Command, Patuxent River, MD.
The work is scheduled to be completed by Mar 2022 and will be executed in Stratford, CN. The contract will use fiscal 2017 aircraft procurement (Navy) funds.
About CH-53K Aircraft
Originally developed and manufactured by Sikorsky, CH-53K is one of the world’s premier heavy lift helicopters, designed to be fully shipboard-compatible and capable of operating from austere and remote forward operating bases. Designated as System Demonstration Test Articles (SDTA), these choppers have the capacity to carry more than 27,000 pounds over a mission radius of 110 nautical miles, which is more than three times the external load carrying capacity of its predecessor – the CH-53E aircraft.
Apart from providing ballistic protection, this copter carries advanced lightweight armor that offers advanced protection to both passenger and crew. Among Lockheed Martin’s CH-53 aircraft product line, the 53K version is the most advanced one. This is because of its 21st century design which will allow militaries to move troops and equipments from ship to shore, and to higher altitude terrain, more quickly and effectively than ever before.
Our View
We remind investors that Lockheed Martin had purchased the Sikorsky Aircraft for $9 billion from United Technologies Corp. in Nov 2015. This buyout strengthened the former's position as the largest defense contractor in the U.S. Notably, it added Sikorsky’s CH-53K along with a handful of other combat as well as commercial choppers to its helicopter product line.
During the second quarter of 2017, CH-53K King Stallion helicopter received an affirmative Milestone C decision from the Defense Acquisition Board. This validated this aircraft’s maturity and robust capability in meeting the U.S. Marine Corps mission requirements. Following this, CH-53K will enter the low-rate initial production phase of the program. Per management, as this Milestone C decision came less than 18 months after the CH-53K made its first flight, it demonstrated a remarkable accomplishment for this aircraft with its unmatched payload capability and modern avionics.
Such developments have further bolstered management’s expectation to witness improved cash flows from the Sikorsky business unit in 2018, going ahead. We believe such generous fund flows from Pentagon, in the form of contracts, will also add further impetus to its desired business expansion in this product line.
Meanwhile, the fiscal 2017 budget proposal reflects an annual increase of approximately $2.2 billion compared with the fiscal 2016 budget. The increased spending would be allocated to certain key areas that can unlock significantly greater opportunities for Lockheed Martin.
Notably, the latest contract is expected to boost the company's business substantially and may even attract more of such contracts in the future, given that the CH-53K is currently the U.S. Marine Corps' critical land and sea based logistics connector.
Price Movement
Lockheed Martin’s stock was up about 15.7% over the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 22.6%. 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. Furthermore, the stock’s performance lags compared with that of General Dynamics Corp. (GD - Free Report) and Huntington Ingalls Industries, Inc. (HII - Free Report) , which surpassed the industry mark.
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
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Lockheed Martin (LMT) Wins $55M Deal for CH-53K Aircraft
Lockheed Martin Corp.’s (LMT - Free Report) Sikorsky Aircraft Corp. has won a modification contract from the U.S. Navy to provide the long lead items in support of low-rate initial production of four Lot II CH-53K aircraft.
Contract Details
The contract is valued at $55 million and was awarded by the Naval Air Systems Command, Patuxent River, MD.
The work is scheduled to be completed by Mar 2022 and will be executed in Stratford, CN. The contract will use fiscal 2017 aircraft procurement (Navy) funds.
About CH-53K Aircraft
Originally developed and manufactured by Sikorsky, CH-53K is one of the world’s premier heavy lift helicopters, designed to be fully shipboard-compatible and capable of operating from austere and remote forward operating bases. Designated as System Demonstration Test Articles (SDTA), these choppers have the capacity to carry more than 27,000 pounds over a mission radius of 110 nautical miles, which is more than three times the external load carrying capacity of its predecessor – the CH-53E aircraft.
Apart from providing ballistic protection, this copter carries advanced lightweight armor that offers advanced protection to both passenger and crew. Among Lockheed Martin’s CH-53 aircraft product line, the 53K version is the most advanced one. This is because of its 21st century design which will allow militaries to move troops and equipments from ship to shore, and to higher altitude terrain, more quickly and effectively than ever before.
Our View
We remind investors that Lockheed Martin had purchased the Sikorsky Aircraft for $9 billion from United Technologies Corp. in Nov 2015. This buyout strengthened the former's position as the largest defense contractor in the U.S. Notably, it added Sikorsky’s CH-53K along with a handful of other combat as well as commercial choppers to its helicopter product line.
During the second quarter of 2017, CH-53K King Stallion helicopter received an affirmative Milestone C decision from the Defense Acquisition Board. This validated this aircraft’s maturity and robust capability in meeting the U.S. Marine Corps mission requirements. Following this, CH-53K will enter the low-rate initial production phase of the program. Per management, as this Milestone C decision came less than 18 months after the CH-53K made its first flight, it demonstrated a remarkable accomplishment for this aircraft with its unmatched payload capability and modern avionics.
Such developments have further bolstered management’s expectation to witness improved cash flows from the Sikorsky business unit in 2018, going ahead. We believe such generous fund flows from Pentagon, in the form of contracts, will also add further impetus to its desired business expansion in this product line.
Meanwhile, the fiscal 2017 budget proposal reflects an annual increase of approximately $2.2 billion compared with the fiscal 2016 budget. The increased spending would be allocated to certain key areas that can unlock significantly greater opportunities for Lockheed Martin.
Notably, the latest contract is expected to boost the company's business substantially and may even attract more of such contracts in the future, given that the CH-53K is currently the U.S. Marine Corps' critical land and sea based logistics connector.
Price Movement
Lockheed Martin’s stock was up about 15.7% over the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 22.6%. 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. Furthermore, the stock’s performance lags compared with that of General Dynamics Corp. (GD - Free Report) and Huntington Ingalls Industries, Inc. (HII - Free Report) , which surpassed the industry mark.
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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