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Lockheed Martin (LMT) Wins $451M Surface Combatant Ship Deal

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Lockheed Martin Corp. (LMT - Free Report) recently clinched a $450.7-million modification contract under the Foreign Military Sales (FMS) program, for providing Saudi Arabia with long-lead-time activities to support the construction of four Multi-Mission Surface Combatant ships. The contract was awarded by the Naval Sea Systems Command, Washington, DC.

Details of the Deal

Work related to the deal will be carried out in Crozet, Virginia; Iron Mountain, MI; Milwaukee, WI; Baltimore, MD and various other locations across the United States. The entire work is expected to get completed by October 2025. Lockheed Martin will utilize foreign military sales funding for completing the task.

A Brief Note on Multi-Mission Surface Combatant

The Multi-Mission Surface Combatant (MMSC) is a highly maneuverable and lethal warship, capable of littoral and open ocean operation. It was designed from the keel up to confront modern maritime and economic security threats. The Multi-Mission Surface Combatant has a range of 5,000 nautical miles and can reach speed in excess of 30 knots.

Paired with world’s most advanced maritime helicopter, the MH-60R Seahawk, the MMSC offers a robust anti-submarine mission capability that is fully interoperable with the U.S. Navy and its coalition partners.

What’s Favoring Lockheed Martin?

Lockheed Martin’s Rotary and Mission Systems (RMS) unit is extensively engaged in the designing and manufacturing of ships, submarine mission and combat system, leading to steady and regular order inflows that fuel the segment’s top-line growth. Notably, the company’s RMS segment recorded first-quarter 2018 sales of $3.2 billion, reflecting a 3% improvement from the year-ago quarter. In line with this, we may expect the latest contract to boost RMS segment’s revenue growth in the days to come, as well.

Meanwhile, last month the U.S. Senate approved the fiscal 2019 defense budget that provisioned investments of $18.4 billion for shipbuilding. Such budgetary developments reflect solid growth prospects for the company’s RMS segment, which, in turn, are likely to boost its profit margin.

Price Movement    

Lockheed Martin’s stock has improved about 10.6% in the last year compared with the industry’s growth of 31.7%. The underperformance may have been caused by the intense competition that the company faces in the
aerospace-defense space for its broad portfolio of products and services, both domestically as well as internationally.




Zacks Rank & Other Key Picks

Lockheed Martin currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space are Northrop Grumman (NOC - Free Report) , Textron Inc. (TXT - Free Report) and Engility Holdings .

While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Textron and Engility Holdings carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman came up with an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 6.54% to $16.61 in the last 90 days.

Textron delivered an average positive earnings surprise of 16.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 3.60% to $3.16 in the last 90 days.

Engility Holdings came up with an average positive earnings surprise of 15.08% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 0.5% to $1.91 in the last 90 days.

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