Lockheed Martin Corp. (LMT - Free Report) recently won a $1.36-billion contract for the production of GPS IIIF 11th and 12th Space Vehicles. The contract was awarded by the Space and Missile System Center, Los Angeles Air Force Base, California.
Per the terms of the deal, the contract entails Lockheed Martin to provide non-recurring engineering services along with space vehicle test bed and simulators. Additionally, the contract also includes options for the production of up to 22 GPS III Space Vehicles, Space Vehicle storage, and launch and on-orbit support. Work related to the deal will be performed in Littleton, CO and is expected to get completed by Aug 31, 2027.
A Brief Note on GPS III Space Vehicles
GPS III (Global Positioning System III) is a military communication satellite designed and being manufactured by Lockheed Martin Space Systems (LMSS) for the United States Air Force (USAF). The satellite is equipped to provide modern anti-jam potentialities, superior system security, position, navigation and timing (PNT) services. Its GPS Block IIIF, or GPS IIIF, is the second set of GPS III satellites, consisting of 22 space vehicles.
What Favors Lockheed Martin?
Due to rising global geo-political tensions in recent times, strengthening a nation’s satellite communication by incorporating advanced technology, has become a very important requirement. In the modern age, military intelligence, navigation & positioning, digital video Broadcasting (DVB are the few demanding applications of satellite communication and these satellites significantly help in strengthening a nation’s military prowess.
As a result, with rapidly rising demand for new-age satellite communication, satellite developers like Lockheed Martin have increased their focus in innovating even more advanced military satellites and associated equipment.
Alongside contracts related to GPS III military communication satellite, Lockheed Martin will most likely acquire contracts related to providing engineering services, technical services, simulators and other components, as it is the only manufacturer of this spacecraft. These, going ahead, will also favorably impact the company’s Space Systems Unit.
Per Markets Research Future, the Global Military Satellite market is projected to see more than 6% CAGR during 2018-2023. This growth is primarily attributable to the growing investment in SATCOM and increasing demand for electro optical imaging systems. We may thus expect the aforementioned developments to work in favor of Lockheed Martin and enable the company to capture more shares in the expanding Military Satellite market, going ahead.
Recent Contract Wins to Create Favorable Impact
In the second quarter of 2018, Lockheed Martin's space systems unit achieved important milestones, including the successful launch of its SBIRS GEO Flight-4 satellite with powerful sensors. This satellite comes with the capability to provide global coverage and increased accuracy to detect greater number of targets.
The company is expected to win more contracts, like the latest one, for its GPS and missile warning satellites from the U.S. Air Force, owing to such major developments along with the rising demand for enhanced satellites.
Such notable contract wins should improve Lockheed Martin’s overall profit margin. Additionally, anticipating a solid inflow of contracts from Pentagon, the company increased its 2018 sales outlook for its Space Systems segment by $350 million.
Lockheed Martin’s stock has improved about only 10.6% in the last year compared with the industry’s growth of 22.2%. The underperformance may have been caused by the intense competition the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically as well as internationally.
Zacks Rank & Key Picks
Lockheed Martin currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings (AJRD - Free Report) , Engility Holdings (EGL - Free Report) and Huntington Ingalls Industries (HII - Free Report) .
While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Engility carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 30.9% to $1.27 in the last 90 days.
Engility delivered an average positive earnings surprise of 19% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 16.1% to $2.02 in the last 90 days.
Huntington Ingalls pulled off an average positive earnings surprise of 9.48% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 in the last 90 days.
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