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Lockheed Martin's Unit to Benefit From $91.3M Black Hawk Deal

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Lockheed Martin Corp.’s (LMT - Free Report) business unit, Sikorsky Aircraft, recently secured a contract to provide engineering and other support services for all versions of the U.S. Army’s H-60 Black Hawk helicopters. Notably, this deal comes at a high time when the U.S. administration is in favor of spending big on the nation’s defense sector.

Valued at $91.3 million, the contract is expected to get completed by June 27, 2024.

Black Hawk’s Significance

The Black Hawk is the primary medium lift helicopter for the U.S. Army that performs a wide range of missions encompassing Air Assault, MEDEVAC, CSAR, Command and Control, and VIP transport. The newest version of the Army’s premier combat utility helicopter, the UH-60M, ensures compatibility with the U.S. Army’s Future Force. It aims to improve the forces’ effectiveness, reduce their vulnerability and allow for future growth, while lowering operating and support costs.

Build upon the state-of-the-art UH-60M Black Hawk, the HH-60W (Whiskey) is the latest chopper in this family of helicopters. It has been designed with additional capabilities to better support the full range of combat rescue and other special missions. This helicopter is expected to enhance the legendary Black Hawk’s versatility by doubling the internal fuel capacity without the use of space hungry auxiliary fuel tanks. Also, the HH-60W is likely to offer a robust weapons suite, and integrate defensive systems and sensors to provide an unprecedented combination of range and survivability.

Lockheed’s Potential in the Combat Helicopter Market

While growing political unrest among the Middle Eastern nations have provided a boost to the demand for weaponries in countries like Bahrain, Saudi Arabia and Iraq, frequent tiff between Russia and European countries have bolstered the need for defense products in Europe. Meanwhile, following a sustained period of growth, many Southeast Asian countries are building up military capabilities and have thus expanded their defense budget over the past couple of years. Given this backdrop, the defense biggies in the United States have benefited significantly being the largest weapons exporters in the world.

Moreover, political unrest prevalent in the United States due to its tensed relationship with countries like North Korea and Iran has sparked the demand for the U.S. defense arsenal over the past few years. With combat helicopters constituting major part of the top notch defense products, such solid demand for defense arsenals has enhanced growth opportunities for the military helicopter market.

It is imperative to mention in this context that Lockheed’s Sikorsky is a prominent provider of combat helicopter and its Black Hawk multirole helicopter serves the U.S. military and the armed forces of 28 other countries worldwide as a tough, reliable utility helicopter. This surely highlights the significance of this family of helicopter in the global military helicopter market.

With the global military helicopter market projected to witness a CAGR of 8.4% during the 2018-2023 period, per a report published by Market Research Future, we may expect Lockheed to benefit significantly from this improvement.

Moreover, of late, the U.S. Air Force program of record has called for 113 helicopters to replace the Air Force’s aging HH-60G Pave Hawk helicopters, which perform critical combat search and rescue as well as personnel recovery operations for all U.S. military services and allies. This should prompt the Pentagon to offer more awards to Sikorsky in the coming days, thereby boosting the company’s profitability.

Price Movement

In a year’s time, shares of Lockheed have gained 22.3% compared with the industry’s 10.1% rally.

 

Zacks Rank & Key Picks

Lockheed carries a Zacks Rank #2 (Buy). A few other top-ranked stocks from the same space are Wesco Aircraft Holdings , Northrop Grumman Corp. (NOC - Free Report) and Leidos Holdings (LDOS - Free Report) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wesco Aircraft’s long-term earnings growth rate is projected at 12%. The Zacks Consensus Estimate for 2019 earnings has moved 3.7% up to 84 cents over the past 60 days.

Northrop Grumman came up with average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 2.26% to $19.42 over the past 60 days.

Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.54% to $4.60 over the past 60 days.

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