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Lockheed Martin's (LMT) Arm Wins $302M Deal for MK 48 Torpedo

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Lockheed Martin Corporation’s (LMT - Free Report) business unit, Rotary and Mission Systems, recently clinched a contract involving the MK 48 torpedo. The Naval Sea Systems Command, Washington, DC. awarded the deal.

Details of the Deal

Valued at $302.2 million, the contract includes manufacture, production, spares, production support material and engineering support for components related to the MK 48 heavyweight torpedo. The contract will serve the U.S. Navy and the Royal Australian Navy.

The work related to this deal will be carried out at multiple locations across the United States, with the majority in Liverpool, NY. The work is scheduled to be completed by October 2026.

What’s Favoring Lockheed Martin?

The MK 48 Mod 7 CBASS torpedo is the U.S. Navy’s most capable and potent anti-surface and anti-submarine weapon in use aboard U.S. Navy and allied submarines. Moreover, it has been designed to be exceedingly lethal and effective against threats operating in deep and shallow waters.

Additionally, broadband sonar enhancement makes the torpedo more effective against emerging submarine classes in the harshest acoustic environments. The CBASS torpedo also has the ability of multiband operation.

Due to the advanced features provided by the weapon, the torpedo has been enjoying significant demand, resulting in multiple contracts wins for Lockheed Martin. The latest contract is a bright example of this.

Going forward, LMT expects production orders for the torpedo to be more than 250 over the next five years for the U.S. Navy. Such a strong demand expectation is likely to benefit the company with a steady inflow of orders, like the latest one, thereby bolstering its top line in the days ahead.

Growth Prospects

Nations are increasing defense spending to strengthen their defense structure. In such a scenario, military torpedoes, which are an integral part of underwater warfare missions, are expected to witness an increase in demand as these assists the Navy in carrying out underwater missions effectively.

Per the report from Market Watch, the torpedo market is expected to witness a CAGR of more than 3.5% during the 2022-2028 period. This is likely to benefit Lockheed Martin as it enjoys an established position in the torpedo market.

Prominent defense majors that have been manufacturing torpedoes and related parts for the defense industry and are likely to enjoy the perks of the increased demand are as follows:

BAE Systems’ (BAESY - Free Report) Spearfish Heavyweight Torpedo sets the benchmark for underwater weapon performance. It is proven to deliver a decisive advantage against the full range of submarine and surface threats in all operating environments.

BAE Systems has a long-term (three to five years) earnings growth rate of 13.2%. BAESY’s investors have gained 49.2% in the past year.

General Dynamics (GD - Free Report) designed the Matador Torpedo Detection System to provide unprecedented coverage against any torpedo threat. Matador provides unparalleled threat detection capability in all challenging environments.

General Dynamics’ long-term earnings growth rate is pegged at 9.3%. Shares of GD have returned 23.9% value to its investors in the past year.

Raytheon Technologies’ (RTX - Free Report) MK 54 lightweight torpedo is the primary anti-submarine warfare weapon used by U.S. Navy surface ships, fixed-wing aircraft and helicopters. Designed to operate in shallow waters and in the presence of countermeasures, it can track, classify and attack underwater targets.

RTX has a long-term earnings growth rate of 9.5%. Shares of Raytheon have risen 21.4% in the past year.

Price Movement

In the past year, shares of Lockheed Martin have rallied 42.8% compared with the industry’s growth of 0.3%.

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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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