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Lockheed Martin Wins $39M FMS Deal to Support PAC-3 Missile
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Pentagon’s largest defense contractor, Lockheed Martin Corp. (LMT - Free Report) , has clinched a modification contract from the U.S. Army Contracting Command, Redstone Arsenal, AL. The deal is moderation to a previously-awarded foreign military sales (FMS) contract awarded to the company by the same.
Details of the Deal
The contract is valued at $39.2 million. Per the terms, Lockheed Martin will provide post-production support to the PATRIOT Advanced Capability-3 (PAC-3) Missile for 2017. The support service will include recapitalization of enhanced launcher electronic system, field missile activities as well as unscheduled maintenance.
Lockheed Martin will utilize fiscal 2017 other, and operations and maintenance (Army) funds to complete the work by June 25, 2018. The contract includes FMS to Germany, Netherlands, Kuwait, Saudi Arabia, Taiwan, Japan and the United Arab Emirates. Work related to the modification deal will be carried out in Grand Prairie, TX.
A Brief Note on PAC-3
PAC-3 is the most advanced, capable and powerful terminal air-defense missile that can accost tactical ballistic missiles, cruise missiles and aircraft. It is a high-velocity interceptor that counters incoming targets by direct body-to-body impact. The PAC-3 missile uses a solid propellant rocket motor, aerodynamic controls, altitude control motors and inertial guidance to navigate.
These missiles are currently used by six nations – the U.S., Germany, Japan, Netherlands, the United Arab Emirates and Taiwan. Apart from the countries listed under the latest contract, the company also has a contract with Kuwait.
According to Lockheed Martin, the PAC-3 Missile Segment Enhancement (PAC-3 MSE) interceptor employs a two-pulse solid rocket motor that boosts altitude and range to meet growing threats. The company sees strong demand for this advanced missile system, going ahead, particularly in politically tense regions of the Middle East.
What's Favoring Lockheed?
Lockheed Martin manufactures combat-proven PAC-3 missiles under production deals from the U.S. Army, Air and Missile Defense Program. This enables the company to enjoy a steady stream of contracts.
Meanwhile, the Trump administration has put forward the fiscal 2017 budget appropriation in March to expand the nation’s defense fund, citing that years of declining funding levels in the Army's investment and modernization accounts has hampered readiness of the U.S. forces. The appropriation request included enhanced funding for upgrading Missile defense system of the country.
On top of that, everyone is aware of the continuous missile brawl that has been taking place for the past few months between North Korea and the U.S. All these developments are bound to boost the demand for today’s A-one missiles such as Lockheed Martin’s PAC-3. Hence, the company is poised to benefit from this.
On the other hand, the company plans to increase its international mix from 21% in 2016 to 30% of total sales in the upcoming years, owing to robust demand witness overseas for its programs. The latest contract is expected to uplift the company's international business substantially. It may even attract more such contracts in the future, since PAC-3 is one of the top priorities in the Pentagon's missile system.
Price Performance
Lockheed’s stock has gained about 16.8% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 32.8%.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 Martin Wins $39M FMS Deal to Support PAC-3 Missile
Pentagon’s largest defense contractor, Lockheed Martin Corp. (LMT - Free Report) , has clinched a modification contract from the U.S. Army Contracting Command, Redstone Arsenal, AL. The deal is moderation to a previously-awarded foreign military sales (FMS) contract awarded to the company by the same.
Details of the Deal
The contract is valued at $39.2 million. Per the terms, Lockheed Martin will provide post-production support to the PATRIOT Advanced Capability-3 (PAC-3) Missile for 2017. The support service will include recapitalization of enhanced launcher electronic system, field missile activities as well as unscheduled maintenance.
Lockheed Martin will utilize fiscal 2017 other, and operations and maintenance (Army) funds to complete the work by June 25, 2018. The contract includes FMS to Germany, Netherlands, Kuwait, Saudi Arabia, Taiwan, Japan and the United Arab Emirates. Work related to the modification deal will be carried out in Grand Prairie, TX.
A Brief Note on PAC-3
PAC-3 is the most advanced, capable and powerful terminal air-defense missile that can accost tactical ballistic missiles, cruise missiles and aircraft. It is a high-velocity interceptor that counters incoming targets by direct body-to-body impact. The PAC-3 missile uses a solid propellant rocket motor, aerodynamic controls, altitude control motors and inertial guidance to navigate.
These missiles are currently used by six nations – the U.S., Germany, Japan, Netherlands, the United Arab Emirates and Taiwan. Apart from the countries listed under the latest contract, the company also has a contract with Kuwait.
According to Lockheed Martin, the PAC-3 Missile Segment Enhancement (PAC-3 MSE) interceptor employs a two-pulse solid rocket motor that boosts altitude and range to meet growing threats. The company sees strong demand for this advanced missile system, going ahead, particularly in politically tense regions of the Middle East.
What's Favoring Lockheed?
Lockheed Martin manufactures combat-proven PAC-3 missiles under production deals from the U.S. Army, Air and Missile Defense Program. This enables the company to enjoy a steady stream of contracts.
Meanwhile, the Trump administration has put forward the fiscal 2017 budget appropriation in March to expand the nation’s defense fund, citing that years of declining funding levels in the Army's investment and modernization accounts has hampered readiness of the U.S. forces. The appropriation request included enhanced funding for upgrading Missile defense system of the country.
On top of that, everyone is aware of the continuous missile brawl that has been taking place for the past few months between North Korea and the U.S. All these developments are bound to boost the demand for today’s A-one missiles such as Lockheed Martin’s PAC-3. Hence, the company is poised to benefit from this.
On the other hand, the company plans to increase its international mix from 21% in 2016 to 30% of total sales in the upcoming years, owing to robust demand witness overseas for its programs. The latest contract is expected to uplift the company's international business substantially. It may even attract more such contracts in the future, since PAC-3 is one of the top priorities in the Pentagon's missile system.
Price Performance
Lockheed’s stock has gained about 16.8% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 32.8%.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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