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Lockheed Wins $52M Deal to Integrate Aegis in DDG 51 Ships

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Lockheed Martin Corp.’s (LMT - Free Report) Rotary and Mission Systems (RMS) business unit recently won a $51.9-million modification contract in connection to Aegis Combat Weapon System development. The contract was awarded by the Naval Sea Systems Command, Washington, D.C., and is expected to get completed by September 2021.

Details of the Deal

Per the deal, Lockheed Martin will offer Aegis shipboard integration engineering, Aegis test team support, Aegis modernization team engineering support, Ballistic missile defense test team support and Aegis Weapon System element assessments. This contract action will provide ship integration and test efforts for nine new construction guided missile destroyer (DDG 51) Class ships and the major modernization of seven DDG 51 Class ships.

The majority of work related to the deal will be performed in Moorestown, NJ.

Aegis System’s Significance

Aegis is an integrated missile guidance system used on U.S. Navy and allied ships to protect the battle group. It is the world’s most advanced combat system that can simultaneously destroy land targets, submarines and surface ships along with providing protection from aircraft, cruise missiles and ballistic missiles. The computer-based command and decision providing ability is the key element of the AEGIS combat system. The Aegis Ballistic Missile Defense (BMD) system is the primary sea-based component of the U.S. missile defense system.

What Favors Lockheed Martin?

Heightened geopolitical tensions and increasing terrorist activities across the globe have compelled nations to strengthen their military arsenal, with missile systems constituting an integral part of it. The United States, being the largest exporter of military weaponry worldwide, follows a similar strategy. This is evident from the allotment of $1.1 billion to purchase AEGIS Ballistic Missile Defense systems in the U.S. fiscal 2021 defense budget.

Being the Navy's primary surface combatant, the Aegis-equipped Arleigh Burke-class (DDG 51) destroyer ship of General Dynamics (GD - Free Report) enjoys solid demand in the United States. With rising demand for these ships, Lockheed Martin should also win contracts for its Aegis weapon system.

Looking Ahead

Per Markets and Markets, the rocket and missile market is projected to reach $70 billion by 2022 from $55.5 billion in 2017 at a CAGR of 4.7%. Factors such as geopolitical issues,  rise in asymmetric warfare and terrorist activities, among others, across the globe are expected to drive the rocket and missile market during the forecast period. Such massive growth projections indicate that Lockheed has ample opportunities to enhance its share in the global missile market.

Besides Lockheed, such encouraging growth projections bode well for major missile makers like Raytheon Technologies (RTX - Free Report) .

Price Movement  

Lockheed Martin’s stock has gained 0.3% in the past year against the industry’s decline of 30.5%.

Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold).

A better-ranked company in the same sector is Teledyne Technologies (TDY - Free Report) , which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Teledyne delivered four-quarter average earnings surprise of 11.7%. The Zacks Consensus Estimate for 2020 earnings has moved up 4.8% to $9.75 in the past 90 days.

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