Lockheed, NOC JV Gets FCR Contract

Zacks

Lockheed Martin Corp. (LMT) and Northrop Grumman Corp.’s (NOC) joint venture, the LONGBOW Limited Liability Company has received a foreign military sales contract worth $51 million for the supply of Fire Control Radars (FCRs). These radars will be used by the Republic of Korea for the AH-64E Apache attack helicopter.

Specifically, the joint venture will offer six LONGBOW FCR systems, spares and in-country support. Manufacturing of these parts are scheduled to be completed by 2016 after which the assembling will be executed at Lockheed Martin's Ocala and Orlando, Fla. facilities, and Northrop Grumman's Baltimore, Md. facility.

These radars are designed specifically to provide information to a fire-control system in order to calculate a firing solution, which means that it provides information on how to direct weapons such that they hit the target. The radar units offer high processing power, which contributes to substantial growth by reducing mass and the cost of maintenance. The units also provide automated engagements with multiple targets, irrespective of the weather, the terrain or any obscurant in the battlefield.

The LONGBOW FCR has been facilitating Apache pilots with superior target detection, location, classification and prioritization capabilities. In June this year, the joint venture had received a contract from Saudi Arabia for the supply of FCRs for their AH-64 Apache Attack Helicopter.

The aerospace and defense companies compete amongst themselves in the information and services markets for a number of small and large programs. With new competitors coming in, it has become important for the U.S. pros to form joint ventures and partnerships to mitigate the effect of cutthroat competition. Indeed, these joint ventures are proving to be successful.

Another such joint venture, Bell-Boeing Joint Project Office formed between The Boeing Company (BA) and Textron Inc. (TXT) is doing well and is continuously receiving contracts. Recently, the joint venture received a firm-fixed-price, sole-source contract for the supply of prop rotor gearboxes to the Defense Logistics Agency (“DLA”). Textron’s Bell Helicopter division also announced that it has collaborated with Lockheed Martin for the development of next generation Bell V-280 Valor helicopters. The company also plans to disclose other members in the coming months.

Despite the cuts in defense spending and the threat of sequestration, Northrop Grumman and Lockheed Martin presently look well-positioned and retain a short-term Zacks Rank #2 (Buy).

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