GD, Lockheed Get DoD Contracts

Zacks

The U.S. Department of Defense (DoD) dispersed 27 contracts worth $766 million on Aug 29, 2013. Though not sizeable, Lockheed Martin Corp. (LMT) received three and General Dynamics Corp. (GD) won two contracts.

The first contract worth $37.3 million to Lockheed Martin calls for the supply of MK48 Mod 7 Common Broadband Advanced Sonar System functional item replacement kits to the U.S. Navy and its allies. Besides providing engineering support on the CBASS FIR kits, the company will also provide warranty on the equipment. Approximately 23% of the contract value is accounted under foreign military sales, mainly to the Netherlands and Canada. This modification contract is scheduled to be completed by Jul 2017.

Per the second contract, Lockheed Martin will perform upgrade work on Visual and Joint Precision Airdrop systems on training system devices for C-130J maintenance workers and aircrew. The contract worth $7 million runs through Dec 31, 2014.

The third is a firm fixed price contract worth $6.9 million per which Lockheed Martin will supply an unspecified number of "smart multi-functional displays." The contract is scheduled to be completed by Jun 2016.

General Dynamics’ first contract calls for the company to provide continued logistics and base life support services in Iraq. The contract worth $56.5 million was awarded by U.S. Army Contracting Command, Tank and Automotive. However, the scheduled date for completion of the contract was not mentioned. Per the other contract, the company is responsible for "demilitarization and disposal" of 49,387 rounds of Improved Conventional Munitions and 5,192 Cluster Bomb Units.

Despite the threat of sequestration, we note that the DoD is continuing to award contracts to defense players – both big and small, publicly traded or private firms.

On Aug 26, 2013, the DoD offered a string of contracts out of which Textron Inc. (TXT) clinched two back-to-back contracts totaling $82.2 million. On that day other major contract winners included Lockheed Martin and Raytheon Company (RTN).

Lockheed Martin remains a key player within the military space and is expected to register a stable performance due to a leveraged presence in the Army, Air Force, Navy and IT programs.  On the other hand, General Dynamics’ revenue exposure is spread over a broad portfolio of products and services that will keep the overall growth momentum steady, going forward. General Dynamics presently retains a short-term Zacks Rank #3 (Hold) while Lockheed Martin looks more appealing with a short-term Zacks Rank #2 (Buy).

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