Lockheed Martin Corp. LMT recently secured a $282-million modification contract for providing long-lead-time material and design to support the construction of four Multi-Mission Surface Combatant (MMSC) ships. The contract was awarded by the Naval Sea Systems Command, Washington, DC.
Details of the Deal
Majority of the work related to the deal will be executed in Marinette, WI and Baltimore, MA.
The entire task is expected to be completed by October 2025. Lockheed Martin will utilize foreign military sales (Kingdom of Saudi Arabia) funds for completing the task.
A Brief Note on MMSC
A MMSC ship is a lethal and highly maneuverable surface combatant capable of littoral and open-ocean combats. It has the interoperability necessary for today’s joint and allied naval force maneuvers. Further, paired with world’s most advanced maritime helicopter, the MH-60R Seahawk, the MMSC will have a robust anti-submarine mission capability that is fully interoperable with the U.S. Navy and its coalition partners. Its mission capabilities include anti- surface warfare, anti-submarine warfare, anti-air warfare, mine warfare, electronic warfare and special operations.
What Favors Lockheed Martin?
Lockheed Martin’s Rotary and Mission Systems (RMS) unit is extensively engaged in the designing and manufacturing ships, submarine mission and combat systems. This leads to steady and regular order inflows that fuel the segment’s top-line growth. Notably, the company’s RMS segment recorded third-quarter 2018 sales of $3.85 billion, reflecting a 14.4% improvement from the year-ago quarter. In line with this, we may expect the latest contract to boost RMS segment’s revenue growth in the days to come.
Interestingly, during the month of July, Lockheed Martin was awarded a similar contract worth $450 million. The rising demand for its MMSC Ships in the Kingdom of Saudi Arabia can be expected to usher in more such contracts involving MMSC ships, which, in turn, will boost the RMS segment’s growth.
Furthermore, the fiscal 2019 U.S. defense budget has provisions for spending $18.4 billion on shipbuilding. Such budgetary developments reflect solid growth prospects for the company’s RMS segment. These, in turn, are likely to boost Lockheed Martin’s profit margin.
Lockheed Martin’s stock has declined 4.3% in the past year against the industry’s growth of 7.4%. 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 and internationally.
Zacks Rank & Other Key Picks
Lockheed Martin currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the same sector are Aerojet Rocketdyne Holdings AJRD, Raytheon Company RTN and The Boeing Company BA.
While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Raytheon and Boeing carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 in the past 90 days
Raytheon delivered average positive earnings surprise of 6.71% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 1.7% to $10.10 cents in the past 90 days.
Boeing pulled off average positive earnings surprise of 28.01% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 3% north to $15.05 in the past 90 days.
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