Defense major, Lockheed Martin Corp.’s (LMT - Free Report) business segment, Rotary and Mission Systems, recently clinched a contract to support AEGIS SPY-1 Radar requirements. Work related to this deal is scheduled to be over by Aug 2019.
Details of the Deal
The contract, which is valued at $23.4 million, has a two-year performance period. It has been awarded by the Supply Systems Command Weapon Systems Support, Mechanicsburg, PN.
Per the deal, Lockheed Martin will maintain requisition support in reference to stringent availability and delivery metrics, inventory modeling, configuration management, obsolescence management, inventory warehousing, transportation and tracking, and furnishing both repairs and spares for 1,594 line items for fleet requirements.
The company will utilize fiscal 2017 working capital (Navy) funding to complete the work, which will be carried out in Moorestown, NJ.
AEGIS or Advanced Electronic Guidance and Instrumentation System is an integrated missile-guidance system. With Lockheed Martin as its primary manufacturer, the AEGIS Weapons system is used by the U.S. Navy and allied ships to protect the battle group.
Another company working on AEGIS is Raytheon Company (RTN - Free Report) , which is the manufacturer of this high-powered radar transmitter that tracks and guides missile functions. At the heart of the system is the AN/SPY-1, an advanced, automatic detect and track, multi-function phased-array radar.
Over time, AEGIS has become an integral part of the U.S. Navy by evolving with new capabilities to counter emerging threats and leverage new technologies. Notably, its latest configuration, Baseline 9, offers an open architecture framework to allow extreme flexibility.
Lockheed Martin's Rotary and Mission Systems business carries out some of the company's high-profile programs. These include the Aegis Combat System, Littoral Combat Ship, MH-60 helicopter avionics, along with military and commercial orders. Also, it generated revenues of $3.4 billion in the second quarter of 2017, reflecting almost 27% of its total revenue.
Coming to order growth for this segment, the Sikorsky business line of the segment secured a five-year contract worth $3.8 billion for supplying 257 Black Hawk helicopters to the U.S. Army as well as to the Saudi Arabian National Guard, in the second quarter.
Currently, the company’s AEGIS is the maritime weapon system of choice for six powerful nations. As of Jan 2017, 84 U.S. Navy ships were in service with the AEGIS Weapons System installed. This number will definitely increase given the strong demand for AEGIS prevalent across the globe. Considering this, we expect Lockheed Martin to bag more contracts like the latest one, in days ahead, which, in turn, will boost its profitability.
Shares of Lockheed Martin rallied 16.1% in the last one year, underperforming the 34.3% rally of the industry it belongs to. This could have been caused by the company’s F-35 program, which, despite being a prime project of the U.S. government, has been repeatedly criticized for being overtly expensive. Moreover, Lockheed Martin faces stiff competition from other defense majors like The Boeing Company (BA - Free Report) and Northrop Grumman Corp. (NOC - Free Report) .
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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