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Deal Win for Lockheed, Northrop JV

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A joint venture between Lockheed Martin Corp. (LMT - Free Report) and Northrop Grumman Corp. (NOC - Free Report) , The LONGBOW Limited Liability Company has received a $90.0 million international contract for the supply of Fire Control Radars (“FCRs”). Per the contract, the joint venture will deliver these Radars to Saudi Arabia for their AH-64 Apache Attack Helicopter.

Moreover, the terms of the contract includes delivery of LONGBOW FCRs for the Saudi Arabia National Guard, LONGBOW Mast Mounted Assemblies for the U.S. Army and AH-64E LONGBOW FCRs, supply of additional parts and maintenance for the Royal Saudi Land Forces Aviation Command.

The Radar Units offer high processing power, which contributes to substantial growth by reducing mass and the cost of maintenance. The units also provide automated engagements at multiple targets, irrespective of the weather, the terrain or any obscurant in the battlefield.

LONGBOW has been providing Apache aircrew with services like target detection, location, classification and prioritization since 1998.

Northrop Grumman has a strong presence in Air Force, Space & Cyber Security programs. Northrop’s product line is well positioned in high priority categories, such as defense electronics, unmanned aircraft and missile defense. Revenue and earnings growth continue to be driven by its strong presence in the current focus areas of cyber security, modernization of defense and homeland security assets, intelligence, surveillance and reconnaissance (“ISR”) systems, advanced electronics and software development.

Meanwhile, Lockheed Martin has significant upside potential based on the Obama administration’s focus on ISR, unmanned systems, force protection, cyber security, and missile defense.

However, the adverse effects of sequestration cannot be ignored. In fact, in April, the budget cuts from sequestration have reduced the number of contracts awarded by the Department of Defense by 52% from Mar 2013 level.

Even, defense majors  like The Boeing Company (BA - Free Report) and Huntington Ingalls Industries Inc. (HII - Free Report) are part of this $37 billion sequestration cut made due to the automatic spending reduction that took effect from Mar 1, 2013.In Feb 2013, the government had announced $1.2 trillion in automatic cuts by 2021.In Feb 2013, the government had announced $1.2 trillion in automatic cuts by 2021.

Lockheed Martin presently retains a short-term Zacks Rank #3 (Hold) while Northrop Grumman carries a short-term Zacks Rank #2 (Buy).


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