Lockheed Martin Corp.’s LMT Mission Systems and Training division recently won a modification contract from the U.S. Department of Defense for development of the Aegis Ballistic Missile Defense (ABMD) 5.1 system and adaption of Aegis Ashore. The latest modification has raised the total cost of the Aegis project from $2.24 billion to $2.44 billion.
The contract is valued at $204.3 million and was awarded by the Missile Defense Agency, Dahlgren, VA. Work will be carried out in Moorestown, NJ.
Work is scheduled to be complete by Sep 30, 2018 and on completion, it will deploy a certified ABMD 5.1 baseline. The contract will utilize fiscal 2016 research, development, test and evaluation funds.
Lockheed Martin’s ABMD is the naval component of the U.S. Missile Defense Agency's Ballistic Missile Defense System (BMDS). It is the world’s only maritime BMDS that can simultaneously attack land targets, submarines and surface ships, while protecting the fleet against aircraft, cruise missiles and ballistic missiles.
Over time, Aegis has evolved new capabilities to counter emerging threats and leverage new technologies. Its latest configuration, called Baseline 9, offers an open architecture framework to allow endless flexibility.
ABMD 5.1 and Aegis Ashore
The ABMD system is available in many versions and the Baseline 5.1 version is scheduled to begin deployment in 2018. ABMD 5.1 will incorporate the SM-3 Block IIA – a new high-speed missile co-developed by the U.S. and Japan – into its combat system. This version also boasts improved data links to permit engage-on-remote operation and will be able to engage longer-range missiles.
On the other hand, Aegis Ashore is the first operational land-based version of the Aegis Combat System, which aims at offering affordable solutions to expand the protection of the Aegis Combat System to inland areas. The first Aegis Ashore site has already been installed in Deveselu, Romania and is expected to become operational by the end of this year. The second Aegis Ashore site, which will initially be deployed with Aegis 5.1, is set to go online in Poland in 2018.
Headquartered in Washington, DC, Lockheed Martin’s Mission Systems and Training business carry out some of the company’s high-profile programs including the Aegis Combat System, Littoral Combat Ship, MH-60 helicopter avionics, and military and commercial orders. The division’s second-quarter sales of $3.3 billion improved 53% from the prior-year quarter. However, operating profit declined 23% year over year to $202 million, while operating margin shrunk 600 basis points to 6.1%.
Going ahead, the company expects 2016 Mission Systems and Training net sales to grow in the mid-double-digit percentage range. That said, the aforementioned contract gain has high potential to significantly boost revenues from Lockheed Martin’s Mission Systems and Training division.
Stocks to Consider
Lockheed Martin currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Engility Holdings, Inc.
EGL, Ducommun Inc. DCO and General Dynamics Corp. ( GD Quick Quote GD - Free Report) . While Engility Holdings and Ducommun sport a Zacks Rank #1 (Strong Buy), General Dynamics carries a Zacks Rank #2 (Buy). Confidential from Zacks
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