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Lockheed (LMT) Wins $1.4B Deal to Make THAAD Interceptors

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Lockheed Martin Corp.’s (LMT - Free Report) business segment, Missiles and Fire Control, recently clinched a modification contract involving the Terminal High Altitude Area Defense (THAAD) system. The Missile Defense Agency, Huntsville, AL has awarded the deal.

Details of the Deal

Valued at $1.42 billion, this contract is expected to be completed by Aug 1, 2027. Per the terms of the deal, Lockheed will manufacture THAAD Interceptors and associated one-shot devices for the U.S. government and the Kingdom of Saudi Arabia (KSA).

Through the latest modification, the value of the contract increased from $6.34 billion to $7.76 billion. Work related to this deal will be executed in Dallas, TX; Sunnyvale, CA; Camden, AK; as well as Troy and Huntsville, AL.

Growing Significance of THAAD

Lockheed Martin’s THAAD is an integrated defensive missile system designed to protect against high-altitude ballistic missile threats. THAAD is the only U.S. system designed for endo-and exo-battlespace, using Hit-to-Kill technology for lethal aim-point accuracy to intercept a threat with direct impact.

Notably, apart from this product line’s well-established market in the United States, THAAD batteries have been deployed in other countries like the United Arab Emirates, Saudi Arabia, Japan, South Korea and Israel. The latest contract win is an example of the solid demand enjoyed by this missile globally.

Lockheed’s Prospects

The U.S. government’s fiscal 2023 defense budget includes a proposed spending plan of $335 million on the THAAD ballistic missile defense systems. Such overwhelming spending provisions, in turn, should usher in more contracts for Lockheed Martin’s THAAD interceptors and associated devices.

In March 2022, it was announced that the PAC-3 Missile Segment Enhancement (MSE) interceptor had been integrated into the THAAD Weapon System – resulting in a more tightly integrated, layered missile defense system offered by Lockheed. This should further boost demand for THAAD, thereby ushering in more inflow of contracts for this missile system, which in turn would push up LMT’s top-line results.

Other Missile Makers Poised to Benefit

Considering the geopolitical scenario, the missile market as a whole is poised to gain. The global rockets and missiles market, valued at $58.3 billion in 2021, is projected to witness a CAGR of 4.8%, to reach $73.8 billion by 2026 per a report by Markets and Markets firm.

Keeping in mind the fact that the United States is the largest military weapon exporter globally, other prominent missile makers, such as Raytheon Technologies (RTX - Free Report) , Northrop Grumman (NOC - Free Report) and Boeing (BA - Free Report) , should benefit from the aforementioned market prospects.

Notably, Raytheon offers a variety of combat-proven missile defense systems, including the Patriot missile, Standard Missile-6 (SM-6), Standard Missile-3 (SM-3), Advanced Medium-Range Air-to-Air Missile (AMRAAM), Evolved Seasparrow Missile (ESSM), Tomahawk cruise missile and a few more.

Raytheon boasts a long-term earnings growth rate of 10.2%. The Zacks Consensus Estimate for its 2022 earnings implies an improvement of 12.2% from the 2021 reported figure.

Northrop manufactures a variety of air-, sea- and land-based missile systems propulsion control systems that support the U.S. Missile Defense Agency (MDA). It also produces airborne missile warning systems as well as medium-class solid rocket motors for the U.S. Navy's Trident II Fleet Ballistic Missile program.

Northrop boasts a long-term earnings growth rate of 6.2%. The Zacks Consensus Estimate for its 2022 sales suggests an improvement of 2.6% from the 2021 reported figure.

Boeing’s missile defense capabilities provide defensive and strategic systems that protect the homeland and deployed forces. The company’s systems within the Integrated Air & Missile Defense portfolio include Arrow 3, which offers regional missile defense capabilities to enable an effective response to short and medium-range ballistic missiles.

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

Price Movement & Zacks Rank

Lockheed Martin, a Zacks Rank #3 (Hold) company, has gained 17.7% in the past year against the industry’s decline of 33%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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