Defense bellwether Lockheed Martin Corporation (LMT - Free Report) recently secured a modification contract for procuring C-130J multi-year production aircraft for the U.S. Coast Guard. Work related to the deal is scheduled to be over by Apr 30, 2020.
Valued at $61.9 million, the contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH. The company will utilize fiscal 2017 Coast Guard aircraft procurement funds to execute the task at Marietta, GA.
A Brief Note on C-130J
C-130J Super Hercules, the latest model in Lockheed Martin’s Hercules family, is a four-engine, turboprop, military transport aircraft. The C-130J's crew includes just two pilots and one loadmaster, since no navigator or flight engineer is required on the aircraft. Among its missions, the C-130J counts capabilities as diverse as special ops, aerial refueling, close air support, search and rescue and personal recovery.
The J-model is almost similar to the classic Hercules in terms of general appearance. However, it uses updated technology like the new Rolls-Royce AE 2100 D3 turboprops from Rolls-Royce Holdings plc (RYCEY - Free Report) that comes with the Dowty R391 composite scimitar propellers, digital avionics and reduced crew requirements. These improvements have boosted its performance over C-130E/H predecessors. In particular, the improved J-model comes with 40% greater range, 21% higher speed and 41% reduced take-off distance.
Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. Its Aeronautics business division is engaged in the production and upgradation of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Notably, C-130J is one of the major Aeronautics programs of the company as well as of the U.S. Air Force.
In 2016, Lockheed Martin delivered 24 C-130J aircraft, of which five were offered to international customers. As of Dec 31, 2016, the company had 88 of these aircraft in its backlog, a number we believe will increase in the coming days, courtesy of the recently won deal. Given the growing demand that the company has been witnessing from overseas market for this tactical aircraft of late, in particular from France and Israel, we can expect it to fetch more similar contracts involving its C-130J jets in the days ahead.
Interestingly, in its latest quarterly results, the company’s Aeronautics division witnessed revenue growth of 19%, partially driven by higher sales volume from C-130J program. Looking forward, for 2017, the company has raised its outlook for this segment’s operating profit by $20 million. Undoubtedly, the recently won deal has advanced Lockheed Martin a step ahead in successfully achieving this target. With more similar deals expected in the future, the C-130J program can be considered as one of the growth drivers for the company.
Lockheed Martin’s stock has returned 26.9% in the last year, underperforming the 41.8% rally of the industry it belongs to. This might have been caused by the company’s F-35 program, which, despite being a prime project of the U.S. government, has been repeatedly criticised for being overtly expensive, over last year. 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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