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Lockheed's (LMT) Unit Wins Deal to Support CH-53K Jet Program

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Lockheed Martin Corp.’s (LMT - Free Report) business segment, Sikorsky Aircraft, recently clinched a contract involving CH-53K aircraft. The Naval Air Systems Command, Patuxent River, MD has awarded the deal.

Details of the Deal

Valued at $23.8 million, the contract is projected to get completed by October 2023. Per the terms of the deal, Sikorsky will provide non-recurring engineering to support the development of an exportable variant to the Marine Corps baseline CH-53K aircraft.

The contract will serve the government of Israel. The majority of the work related to this deal will be carried out in Stratford, CT.

Importance of CH-53K Helicopter

The CH-53K helicopter builds on Sikorsky’s 50 years of manufacturing and operational triumph with its CH-53A, CH-53D/G and CH-53E predecessors. The chopper 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 (CSAR).

Helicopters & Hostile Weaponries

Countries globally have been reinforcing their military resources due to intense geopolitical tensions and amplified terrorist threats. The United States, the largest exporter of military weaponries worldwide, is focused on strengthening its military resources. This is quite evident from the allotment of a $773 billion investment plan in the U.S. fiscal 2023 defense budget for military arsenals and weaponry. Impressively, this budget implies a 4.1% increase from fiscal 2022’s enacted amount.

No doubt, among hostile weaponries, military helicopters have been gaining importance owing to advancements and the integration of new tactical and logistical features. This has provided ample opportunities for Lockheed Martin to win production as well as modification contracts for helicopters in recent times. The latest contract win is a bright example of that. Such contract wins, in turn, are likely to drive revenues from the Rotary and Mission Systems (RMS) business segment, which comprises the Sikorsky helicopters.

The growing demand for proven combat system helicopters will continue to support Lockheed Martin.

Growth Prospects

Per a Mordor Intelligence report, the global military aircraft market is expected to witness a CAGR of more than 4% during the 2022-2031 time period. Such projections can be attributed to a rise in global threats and geopolitical instabilities, and increased spending on defense. Considering such market growth projection, Lockheed along with other combat jet manufacturers like Northrop Grumman (NOC - Free Report) , Boeing (BA - Free Report) and Textron (TXT - Free Report) are thus poised to benefit.

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.

Northrop Grumman boasts a long-term earnings growth rate of 6.1%. The Zacks Consensus estimate for NOC’s 2022 earnings, pegged at $24.84, has declined 0.1% in the past 60 days.

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.

Boeing boasts a long-term earnings growth rate of 4%. The Zacks Consensus Estimate for BA’s 2022 sales, pegged at $76.55 billion, indicates an improvement of 22.9% from the prior-year quarter’s 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.

Textron boasts a long-term earnings growth rate of 12.7%. The Zacks Consensus Estimate for TXT’s 2022 sales, pegged at $13.39 billion, indicates an improvement of 8.2% from the prior-year quarter’s reported figure.

Price Movement

In the past month, shares of Lockheed have gained 9.9% against the industry’s decline of 41.2%.

Zacks Investment Research
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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.

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