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Lockheed (LMT) Sikorsky Unit Wins Deal to Modify CH-53K Jets

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Lockheed Martin Corp.'s (LMT - Free Report) business unit, Sikorsky, recently clinched a modification contract involving the CH-53K helicopter. The Naval Air Systems Command, Patuxent River, MD, has awarded the contract.

Valued at $25.6 million, the contract is expected to be completed by June 2023. Per the terms, through this modification, Sikorsky will offer non-recurring engineering efforts to integrate, test, and qualify re-designed data concentrator and blade fold distributor units for CH-53K jets.

The majority of work related to this deal will be carried out in Torrance, CA.

Importance of CH-53K Helicopter

The CH-53K helicopter specializes in heavy lifting and movement of troops and equipment from ship to shore and higher altitude terrains more rapidly and effectively for expeditionary U.S. Marine Corps and international military missions. It also supports missions like humanitarian aid, troop transport, casualty evacuation, support of special operations forces, and combat search and rescue.

Benefits of the Contract

Countries globally have been reinforcing their military resources due to intense geopolitical tensions and amplified terrorist threats.

Among other combat arsenals and weaponries, military helicopters have also been gaining importance owing to advancements and integration of new tactical, logistical features. This has provided ample opportunities for Lockheed Martin to win production and modification contracts for helicopters in recent times. The latest contract is a bright example of that.

Such contract wins are likely to drive revenues from the Rotary and Mission Systems business segment, which comprises the Sikorsky helicopters and reported a 6% annual improvement in its fourth-quarter 2021 top line.

Prospects

The United States, which is the largest exporter of military weaponries worldwide, is also strengthening military resources. This is quite evident from the fiscal 2023 budget proposal worth $773 billion put forward by the Biden administration for the Department of Defense, with a $56.5-billion planned investment in combat aircraft. Impressively, the defense budget request reflects a 4.1% increase from the fiscal 2022 enacted amount.

Such solid budgetary provisions should benefit Lockheed along with other defense manufacturers like Northrop Grumman (NOC - Free Report) , Boeing (BA - Free Report) and Textron (TXT - Free Report) , which also have keen expertise in manufacturing military aircraft.

Since its inception, Northrop Grumman has been a pioneer in the development of manned aircraft for combat. Northrop Grumman also has a tradition of providing technological leadership in all aspects of military aviation and aircraft, such as manned, unmanned, targeting, surveillance, and aircraft self-protection systems that enable warfighters to accomplish missions anytime, anywhere and under any conditions.

NOC stock boasts a long-term earnings growth rate of 6.2%. The Zacks Consensus Estimate for 2022 sales implies growth of 2.6% from the 2021 reported figure.

Boeing’s Defense, Space & Security segment’s primary products include fixed-wing military aircraft, F/A-18E/F Super Hornet, F-15 programs, P-8 programs, KC-46A Tanker, and T-7A Red Hawk. This segment also produces rotorcraft and rotary-wing programs such as CH-47 Chinook, AH-64 Apache and V-22 Osprey.

BA stock boasts a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for 2022 earnings implies growth of 137.2% from the 2021 reported figure.

Textron’s business unit, Textron Aviation Defense, designs, builds and supports versatile and globally known military aircraft preferred for training and attack missions. Some of Textron’s renowned products include Beechcraft T-6C trainer and AT-6 Wolverine.

TXT stock boasts a long-term earnings growth rate of 11.8%. The Zacks Consensus Estimate for 2022 earnings implies growth of 21.8% from the 2021 reported figure.

Price Movement

In the past year, shares of Lockheed have gained 20.2% against the industry’s 31% decline.

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Zacks Rank

Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.