Lockheed Martin’s (NYSE:LMT) Missile and Fire Control (MFC) business division recently won a $364.6 million contract for Army Tactical Guided Missile and Launching Assembly Service Life Extension program. The deal was awarded under the domestic and foreign military sales program.
Details of the Deal
The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL. Per the terms, the company will deliver the missiles and extension programs to the Romanian Army.
Work related to the deal will be performed in Dallas, TX; Boulder, CO; Clearwater, FL; Cincinnati, OH and various other locations across the United States. The tasks are expected to get completed in Mar 26, 2020. Lockheed Martin will utilize fiscal 2017 and 2018 research, development, test and evaluation; foreign military sales; overseas contingency operation and aircraft procurement (Army) funds for completing the task.
A Brief Note on Army Tactical Missile System
The Army Tactical Missile System (ATACMS) is a conventional surface-to-surface artillery weapon system capable of striking targets well beyond the range of existing Army cannons, rockets and other missiles. The ATACMS long-range guided missiles are fired from the MLRS M270 and M270A1 weapons platform.
What’s Favoring Lockheed Martin?
Lockheed Martin’s MFC unit acquired several major orders in the second quarter of 2018. The segment was successful in clinching contracts worth $282 million for supporting PAC-3 missiles, $279 million for the delivery of PAC-3 missiles, and $200 million for upgrading THAAD and PATRIOT missiles.
Inevitably, such massive order inflows for its missile programs tend to fuel the company’s top-line growth. Lockheed Martin’s MFC segment recorded first-quarter 2018 net sales of $1.7 billion, which reflected a healthy 8% improvement from the year-ago quarter. In line with this, we may expect the latest contract to boost MFC’s revenue growth in the days to come, as well.
Moreover, the fiscal 2019 defense budget, recently approved by the U.S. Senate, provisions for a spending plan of $6 billion for varied missile programs. Lockheed Martin, being a prominent missile supplier for the U.S. Army and its overseas clients, is expected to gain significantly from this provision.
Furthermore, the rocket and missile market is projected to grow from $55.5 billion in 2017 to $70 billion by 2022, at a CAGR of 4.74% during the forecast period (as per Markets and Markets research firm). Given this huge opportunity for expansion, frequent contract wins from Pentagon for its various missiles, including the latest one, will allow Lockheed Martin to further enhance its market share in the aerospace and defense industry.
Lockheed Martin’s stock has improved about 7.1% in the last year compared with the industry’s growth of 30.1%. The underperformance may have been caused by the intense competition that 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
While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Textron and Wesco Aircraft Holdings carry a Zacks Rank #2 (Buy).
Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 5.65% to $16.44 in the last 90 days.
Textron came up with an average positive earnings surprise of 16.64% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 2.94% to $3.15 in the last 90 days.
Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.
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