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Lockheed Wins Trident II Support Services Deal Worth $80M
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Defense major Lockheed Martin Corp.’s (LMT - Free Report) business segment, Rotary and Mission Systems (RMS) has won a Navy contract to offer technical and program management support services. These services will be provided in relation to the navigation subsystems of Lockheed’s Trident II (D5) Shipboard Systems Integration (SSI) Increments four and eight.
Details of the Deal
Valued at $79.9 million, the deal was awarded by the Strategic Systems Programs, Washington, D.C. Per the terms of the agreement, Lockheed will provide the required navigation hardware and software design, testing, installation, and deliverables for the SSI Increments Fleet support services. The services will be offered for the current fleet ballistic missile strategic weapon system, the U. S. and U.K. inertial navigation system and gyro modification and repair associated efforts, and development efforts for the modernization program of SSI program, including U.S. and U.K. trainer maintenance and development.
The majority of the work related to this contract will be executed in Mitchel Field, NY and the rest will be carried out at a few other locations across the country. The contract will utilize fiscal 2017 research, development, technology and evaluation funds, other procurement funds, as well as U.K. funds to complete the deal. Work is scheduled to be over by Dec 31, 2018.
A Brief Note on Trident II
Trident II (D5) is the latest generation of the Navy's submarine-launched fleet ballistic missiles, developed and produced by Lockheed Martin. These missiles are equipped with multiple independently-targetable reentry vehicles (MIRV) and armed with thermonuclear warheads.
It enhances U.S.’ position in strategic arms negotiation by providing a weapon system with performance and payload flexibility that accommodates various treaty initiatives. The Trident II missile's increased payload allows the deterrent mission to be achieved with fewer submarines.
Our View
In Nov 1979, the U.S. Navy was instructed to pursue a program of incremental submarine-launched ballistic missile modernization. With increasing global threats — especially the recent ones that include the ISIS gaining more grounds these days — developed nations have raised their defense budget and are indulging in stocking up more missiles.
Per Lockheed, due to the high rate of Trident II missile production in the early years of the program, a significant portion of the inventory will age out in the near term, driving the quantities to increase in FY 2018.
Consequently, we can expect the company to win more of such contracts in the future, given that Trident II has one of the top priorities in the U.S. Navy’s missile system. This, in turn, will boost Lockheed’s growth trajectory in the days ahead, making its prime U.S. contractor position even more solid.
Price Performance
Lockheed’s stock has gained about 16.3% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 24.5%.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 The Boeing Company (BA - Free Report) , General Dynamics Corp. (GD - Free Report) and Northrop Grumman Corp. (NOC - Free Report) .
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Lockheed Wins Trident II Support Services Deal Worth $80M
Defense major Lockheed Martin Corp.’s (LMT - Free Report) business segment, Rotary and Mission Systems (RMS) has won a Navy contract to offer technical and program management support services. These services will be provided in relation to the navigation subsystems of Lockheed’s Trident II (D5) Shipboard Systems Integration (SSI) Increments four and eight.
Details of the Deal
Valued at $79.9 million, the deal was awarded by the Strategic Systems Programs, Washington, D.C. Per the terms of the agreement, Lockheed will provide the required navigation hardware and software design, testing, installation, and deliverables for the SSI Increments Fleet support services. The services will be offered for the current fleet ballistic missile strategic weapon system, the U. S. and U.K. inertial navigation system and gyro modification and repair associated efforts, and development efforts for the modernization program of SSI program, including U.S. and U.K. trainer maintenance and development.
The majority of the work related to this contract will be executed in Mitchel Field, NY and the rest will be carried out at a few other locations across the country. The contract will utilize fiscal 2017 research, development, technology and evaluation funds, other procurement funds, as well as U.K. funds to complete the deal. Work is scheduled to be over by Dec 31, 2018.
A Brief Note on Trident II
Trident II (D5) is the latest generation of the Navy's submarine-launched fleet ballistic missiles, developed and produced by Lockheed Martin. These missiles are equipped with multiple independently-targetable reentry vehicles (MIRV) and armed with thermonuclear warheads.
It enhances U.S.’ position in strategic arms negotiation by providing a weapon system with performance and payload flexibility that accommodates various treaty initiatives. The Trident II missile's increased payload allows the deterrent mission to be achieved with fewer submarines.
Our View
In Nov 1979, the U.S. Navy was instructed to pursue a program of incremental submarine-launched ballistic missile modernization. With increasing global threats — especially the recent ones that include the ISIS gaining more grounds these days — developed nations have raised their defense budget and are indulging in stocking up more missiles.
Per Lockheed, due to the high rate of Trident II missile production in the early years of the program, a significant portion of the inventory will age out in the near term, driving the quantities to increase in FY 2018.
Consequently, we can expect the company to win more of such contracts in the future, given that Trident II has one of the top priorities in the U.S. Navy’s missile system. This, in turn, will boost Lockheed’s growth trajectory in the days ahead, making its prime U.S. contractor position even more solid.
Price Performance
Lockheed’s stock has gained about 16.3% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 24.5%.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 The Boeing Company (BA - Free Report) , General Dynamics Corp. (GD - Free Report) and Northrop Grumman Corp. (NOC - Free Report) .
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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Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>