Lockheed Wins $27M U.S. Navy Deal

Lockheed Martin Corporation (LMT - Analyst Report) has been awarded a firm fixed-price contract, worth $27 million, by the U.S. Navy. Per the agreement, the company will manufacture parts of 22 units of Vertical Launch anti-submarine (“VLA”) missiles for the U.S. Navy. The components would be manufactured at the company’s Akron facility in Ohio.

The VLA missile is a supersonic, quick-attack anti-submarine warfare weapon. This missile is useful in open-ocean and littoral waters and can be launched from cruisers and destroyers. The missile system takes the lightweight torpedo to the assigned target area where it positions itself to thwart an attack.

The efficiency and accuracy of the VLA missiles has increased the confidence of the naval forces around the world. Consequently, they have expressed their interest in these missiles. Apart from the U.S. Navy, Lockheed has supplied VLA missiles to the Japanese Maritime Self Defense Force through a blend of Foreign Military Sales (“FMS”) and direct commercial sales agreement.

Lockheed has a strong relationship with the U.S. Navy. In April 2012, the U.S. Navy awarded Lockheed Martin a five-year contract, worth $1.05 billion, to provide approximately 200 digital cockpits and integrated mission systems and sensors for the Navy MH-60S “Sierra” and MH-60R “Romeo” helicopters.

We view Lockheed Martin as a well-positioned organization with its successful delivery of missiles and guided weapons, aircrafts, radars, information technology management services, infrastructure and applications to the U.S. and several other international defense forces. As the world’s largest standalone defense contractor, Lockheed Martin has a strong contract pipeline. Lockheed Martin ended the first quarter of 2012 with $76.6 billion of backlog.

On the flip side, we must remember that a large percentage of Lockheed Martin’s business comes from the U.S. government. The U.S. government is planning to curtail its defense spending to meet deficit reduction targets. This can negatively impact the company’s top and bottom line performance in the future.

During first quarter 2012 earnings, Lockheed Martin affirmed its full year 2012 earnings to be in the range of $7.70 – $7.90 per share. The Zacks Digest Estimate for second quarter 2012 and full year 2012 earnings is pegged at $1.91 and $7.90 per share, respectively.

Lockheed Martin Corporation currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. The company competes with Northrop Grumman Corporation (NOC - Analyst Report).

Bethesda, Maryland-based Lockheed Martin Corporation is a global security and aerospace company that is principally engaged in the research, design, development, manufacture, integration and maintenance of advanced technology systems, products and services.