Lockheed Martin Corp.’s (LMT - Free Report) business unit, Sikorsky, recently secured a modification contract to support maintenance of CH-53K helicopter. The deal was awarded by the Naval Air Systems Command, Patuxent River, MD.
Valued at $25.1 million, the contract is expected to be completed in August 2024. Per the terms of the deal, the company will offer non-recurring engineering to develop logistics support products for the Maintenance Task Analysis Phase II, a provisioning database of technical information to include 2D drawings. This will support all operational, intermediate, and depot level maintenance for the CH-53K helicopter. The majority of the work related to the deal will be executed in Stratford, CT.
Significance of CH-53K Program
The CH-53K helicopter takes forward Sikorsky’s 50 years of manufacturing and operational success with its CH-53A, CH-53D/G and CH-53E predecessors. The new heavy lifter allows the U.S. Marine Corps and international militaries to move troops and equipment from ship to shore, and to higher altitude terrains more quickly and effectively. It is also effective for handling missions like humanitarian aid, troop transport, casualty evacuation, support of special operations forces, and combat search and rescue (CSAR).
What Favors Lockheed Martin?
In recent times, military helicopters in the U.S. aerospace-defense market have gained prominence and significant traction due to advancements and integration of new tactical, logistical and other important features. Some of these developments can be attributed to Lockheed Martin, paving the way for securing valuable helicopter-related contracts in recent times.
Such contracts are indicative of solid revenue growth prospects of the company’s Rotary and Mission Systems (RMS) business segment, which comprises the Sikorsky helicopters. In second-quarter 2020, revenues at Lockheed Martin’s RMS unit increased a solid 7% year over year, with its Sikorsky helicopter programs being one of the primary growth contributors.
With the fiscal 2021 defense budget offering investment potential worth $57billion in Aircraft, including $1.5 billion for Sikorsky CH-53K, we expect Lockheed Martin’s RMS unit to receive consistent order flows from the Pentagon like the latest one. This, in turn, should lead to similar top-line growth for the unit in the coming days.
Helicopter Market Prospect
Looking ahead, the global attack helicopter market is estimated to witness CAGR of more than 4% during the 2020-2025 period, with North America constituting the largest share of this market, per the latest forecast made by market research firm, Mordor Intelligence. This indicates solid opportunities for combat helicopter manufacturers like Lockheed Martin and Boeing (BA - Free Report) .
In a year’s time, shares of Lockheed Martin have gained 6.4% against the industry’s 23% decline.
Zacks Rank & Key Picks
Lockheed Martin currently carries a Zacks Rank #3 (Hold). Some better-ranked companies in the same sector are Ducommun Incorporated (DCO - Free Report) and Teledyne Technologies Inc. (TDY - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ducommun delivered average earnings surprise of 60.22% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up 16.3% to 57 cents over the past 30 days.
Teledyne delivered average earnings surprise of 11.70% in the trailing four quarters. The Zacks Consensus Estimate for 2020 earnings has climbed up 4.8% to $9.75 over the past 30 days.
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