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Lockheed (LMT) Unit Wins $736M Deal to Aid CH-53K Production

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Lockheed Martin Corp.’s (LMT - Free Report) business unit, Sikorsky, recently clinched a modification contract involving low-rate initial production of CH-53K heavy-lift helicopter. The award has been offered by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $735.9 million, the contract is scheduled to be completed in December 2024. Per the contract terms, this new modification aims at increasing the scope for nine CH-53Ks and associated aircraft along with programmatic and logistical support.

The majority of work related to this deal will be executed in Stratford, CT; Wichita, KS; and Salt Lake City, UT.

Growing Importance of CH-53K Helicopter

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 in handling missions like humanitarian aid, troop transport, casualty evacuation, support of special operation forces, and combat search and rescue.

In February 2021, Israel made a decision to purchase Lockheed’s CH-53K helicopter over Boeing's (BA - Free Report) CH-47, in an effort to further build on the Israel Defense Force’s capabilities. Such a strategic move by Israel could be pivotal for Lockheed’s growth in the trouble-ridden Middle East area over top competitors.

What Favors Lockheed?

Lockheed’s Sikorsky unit provides military and rotary-wing aircraft to all five branches of the U.S. armed forces along with military services and commercial operators in 40 nations. Hence, this unit serves as a major revenue-generating division for this defense contractor.

In recent times, increasing geopolitical tensions across the world have prompted both developed and developing nations to effectively increase their defense budget. It is imperative to mention in this context that the fiscal 2022 defense budget proposal reflects funding worth $753 billion for U.S. defense programs, implying an annual increase of 1.7%. Interestingly, as part of this proposal, a sum of $1.7 billion has specifically been allotted to procure nine Sikorsky's CH-53K King Stallion Helicopters. On approval of the proposal, orders for CH-53K King Stallion’s wide variety of military products would likely increase, thereby boosting Lockheed’s prospects.

Will Other Helicopter Makers Benefit?

Substantial fleet modernization plans of militaries deploying new and advanced attack helicopters are anticipated to support the combat helicopter market growth. Such projections also bode well for other helicopter makers such as Airbus SE (EADSY - Free Report) , Boeing and Textron (TXT - Free Report) .

Price Movement and Zacks Rank

Shares of Lockheed Martin, a Zacks Rank #3 (Hold) company, have gained 3.9% in the past year compared with the industry’s 19.3% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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