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Lockheed Martin to Gain I-MILES Simulation System for $288M

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Lockheed Martin Corp. (LMT - Free Report) recently signed a deal to acquire Instrumentable Multiple Integrated Laser Engagement System (I-MILES) Combat Vehicle Tactical Engagement Simulation System (CV TESS). Work related to this deal is expected to be over by Mar 30, 2024.

Valued at $288 million, this contract will complete the basis of issue and potentially replace older legacy systems. It has been awarded by the Army Program Executive Office Simulation, Training and Instrumentation, Orlando, FL. Work locations and funding will be determined as per each order.

A Brief Note on I-MILES

The I-MILES is the U.S. Army’s primary live simulation system that offers force-on-force and force-on-target collective training at home stations and Combat Training Centers (CTCs). I-MILES products include man-worn systems, combat vehicle systems, target systems, shoulder-launched systems and controller devices.

The I-MILES CV TESS offers live training devices for armored vehicles with fire control systems. It interfaces and communicates with CTCs and home station instrumentation, providing casualty and battlefield damage assessments for after-action reporting. It also offers real-time casualty effects necessary for tactical engagement training in direct fire force-on-force and instrumented training scenarios.

Our View

Lockheed Martin’s Rotary and Mission Systems (RMS) business provides simulation and training services to prepare U.S. soldiers for critical missions across platforms. In 2016, the RMS segment generated sales of $13.5 billion, which represented 28% of Lockheed Martin’s total sales. Going ahead, management expects to witness substantial quarterly revenue growth in this business, toward which contracts like the aforementioned one will surely make material contribution.

Being the Pentagon’s prime defense contractor, Lockheed Martin enjoys a lion’s share of the aerospace-defense industry in the U.S. On top, the additional $25 billion budget proposal from President Trump for core Defense Department programs for the current fiscal buoys optimism for biggies like Lockheed Martin. In fact, last month, while discussing the company’s growth plans at the annual media day event, its CEO Hewson applauded the recently passed (House only) fiscal 2017 budget, which has strong support for Lockheed Martin’s programs, including the F-35, UH-60 Black Hawks, C-130s, and missile defense programs. No doubt, this reflects the U.S. government’s willingness to invest more in the company’s defense equipment.

Price Performance

Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry in the last one year, with the company’s gain of 19.2% lagging the industry’s addition of 24.8%. This underperformance might have been led by intense competition from some of the largest defense primes in the U.S., particularly The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have come down by 2 cents over the past 30 days, which reflects investors’ reluctance to consider the stock as a suitable investment option for the time being.

Zacks Rank

Lockheed Martin currently has a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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