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Lockheed Martin Gains $125M Navy Deal for A-RCI System

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Defense prime Lockheed Martin Corp.’s (LMT - Free Report) Rotary and Mission Systems business division has secured a modification contract for providing engineering and technical support for Acoustic - Rapid Commercial-Off-The-Shelf (COTS) Insertion (A-RCI) systems. Notably, A-RCI is an open-architecture sonar system that is used to maintain an advantage in acoustic detection of threat submarines.

Details of the Deal

Valued at $125.2 million, the contract has been offered by the Naval Sea Systems Command, Washington, D. C. Per the terms of the deal, Lockheed Martin’s Rotary and Mission Systems segment will provide engineering services to facilitate the development and production of COTS Insertion A-RCI Systems. 

Majority of the work related to this deal will be carried out in Manassas, VA. The contract will utilize fiscal 2013, 2014 and 2015 shipbuilding and conversion; and fiscal 2017 research, development, test and evaluation funds and is expected to be over by Dec 2017.


A Brief Note on A-RCI Systems

A-RCI uses legacy sensors and replaces central processors with commercial off-the-shelf (COTS) computer technology and software, within submarines.  This system helps the U.S. Navy in searching, detecting and tracking submarine and surface vessels in open-ocean and littoral sea environments without being counter-detected. It also facilitates in covertly executing Naval Special Warfare missions as well as performing under-ice operations.

In the 1990s, Lockheed Martin unveiled A-RCI Systems which allowed frequent hardware and software upgrades, was highly effective and offered improved acoustic quieting measures at a far lower cost than previously possible.

Our View

With the rapid rise in terrorist attacks over the last decade, the U.S. Navy’s focus has shifted to littoral waters, the shallow areas near coastlines, where it must patrol and defend against small subs, underwater mines, and fast attack boats. Considering this, the need for timely detection and localization of quiet subs in the especially noisy shallow-water sonar field has made the ARCI submarine sonar system all the more critical. Constant upgrades of the system have made it all the more valuable for the nation’s naval base and an attractive choice of defense equipment for the U.S. allied countries.

As geopolitical uncertainty continues to prevail across the globe with no improvement in sight, renowned defense contractors like Lockheed Martin are expected to win more such deals in the days to come. Undoubtedly, this will bolster the company’s top line manifold, going ahead.

Zacks Rank & Stocks to Consider

Lockheed Martin currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the aerospace and defense sector include Engility Holdings, Inc. (EGL - Free Report) , Northrop Grumman Corporation (NOC - Free Report) and Leidos Holdings, Inc. (LDOS - Free Report) .

Engility Holdings sports a Zacks Rank #1 (Strong Buy) and has witnessed a 3.3% rally on Nov 14. On an average, the company has posted a positive earnings surprise of 23.19% in the trailing four quarters.

Northrop also sports a Zacks Rank #1 and has seen a 1.5% rise on Nov 14. On an average, the company recorded a positive earnings surprise of 8.29% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Leidos Holdings carries a Zacks Rank #2 (Buy) and has witnessed a 2.1% gain on Nov 14. On an average, the company delivered a positive earnings surprise of 12.20% in the trailing four quarters.

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