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Lockheed, Northrop Win DoD Contracts

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Defense major Lockheed Martin Corp. (LMT - Free Report) won a $48.8 million modification contract to provide technical services on the Aegis air defense system for the U.S. Navy.

Per this contract, the company will have an option to provide technical engineering, configuration management, related equipment/supplies, quality assurance, information assurance, and additional operation and maintenance services for the Navy’s Aegis air defense system. The work on this contract is slated for completion by June next year.

The latest contract is a part of the U.S. Department of Defense’s (DoD) 14 new contracts announced on Sep 3, 2013. Among the awards, Northrop Grumman Corp. (NOC - Free Report) won a $6.6 million contract modification for large aircraft infra-red counter measure (LAIRCM) systems. These systems have been developed for the U.S. Air Force.

The contract is expected to run through Sep 2014. LAIRCM is an on-board system utilized for protecting large transport helicopters and airplanes from hostile missile fire.

Though the aerospace and defense industry is vulnerable to defense budget cuts and sequestration, the defense behemoths have diversified their businesses and are not lacking in DoD contracts.

Apart from small pickups from DoD contracts, these companies are also clinching deals of higher value. Recently, Lockheed Martin received a contract from the DoD to provide 19 additional AN/TPQ (Q-53) radar systems, a long-range counter fire radar that provides soldiers with enhanced 360-degree protection from indirect fire. The contract is worth $206 million.

The company also received a contract worth $852.3 million from the DoD to provide the required equipment for F-35 fighter jets under Low Rate Initial Production Lot 6.

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders. We expect Lockheed Martin to register a stable performance in the long run due to a leveraged presence in the Army, Air Force, Navy and IT programs.

The company presently retains a short-term Zacks Rank #2 (Buy). Other favorable names in the space include Alliant Techsystems Inc. and Huntington Ingalls Industries, Inc. (HII - Free Report) . While Alliant Techsystems carries a Zacks Rank #1 (Strong Buy), Huntington Ingalls holds a Zacks Rank #2 (Buy).

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