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Lockheed Martin Secures $1.1B Contract for PAC-3 Missiles

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Lockheed Martin Corp.’s (LMT - Free Report) business unit, Missiles and Fire Control, won a modification contract from the U.S. Army for its Patriot Advanced Capability-3 (“PAC-3”) and PAC-3 Missile Segment Enhancement (PAC-3 MSE) missiles. The contract is valued at $1.09 billion and the contracting activity is Army Contracting Command, Redstone Arsenal, AL.

Per the contract, which also involves foreign military sales (“FMS”), Lockheed Martin will build and deliver PAC-3 and PAC-3 MSE interceptors for the U.S. Army, and PAC-3 interceptors, Launcher Modification Kits, related equipment and spares to the Kingdom of Saudi Arabia, the Republic of Korea and Qatar.

Work is scheduled to be complete by Jun 30, 2019 and will be performed in Grand Prairie, TX; Lufkin, TX; Camden, AR; Chelmsford, MA; Ocala, FL; Huntsville, AL; and Anaheim, CA.

PAC-3 is the most advanced, capable and powerful terminal air defense missile that can defend against tactical ballistic missiles, cruise missiles and aircraft. It is a high-velocity interceptor that counters incoming targets by direct body-to-body impact. The PAC-3 missile uses a solid propellant rocket motor, aerodynamic controls, attitude control motors, and inertial guidance to navigate.

These missiles are currently used by six nations including the U.S., Germany, Japan, Netherlands, United Arab Emirates and Taiwan. Apart from the countries listed under the latest contract, Lockheed Martin has a contract with Kuwait for these missiles.

According to Lockheed Martin, the PAC-3 MSE missile employs a two-pulse solid rocket motor that boosts altitude and range to meet growing threats.

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the U.S. Army, Air Force, Navy and IT programs.

The company generated 20% of its total sales from international customers in 2014, including FMS. The growing international mix is expected to rise further and the company reiterated its plan to increase that to 25% of total sales in the upcoming years. Lockheed Martin continues to witness robust demand in the international market for its programs. In particular, the Asia-Pacific and Middle Eastern countries comprise its biggest market for Missile Defense.

We remind investors that the company reported impressive third-quarter results with better-than-expected earnings and higher revenues, solid margins and strong cash flows, buoyed by robust sales of its F-35 Joint Strike Fighter. Solid quarterly results enabled it to lift its 2015 guidance for sales, operating profit, and earnings per share.

Zacks Rank

Lockheed Martin currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace and defense sector include Leidos Holdings, Inc. (LDOS - Free Report) , General Dynamics Corporation (GD - Free Report) and The Boeing Company (BA - Free Report) . While Leidos sports a Zacks Rank #1 (Strong Buy), both General Dynamics and Boeing carry a Zacks Rank #2 (Buy).

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