Lockheed Wins DoD Contracts

Zacks

Lockheed Martin Corp (LMT) clinched two back-to-back contracts from the Department of Defense. The contracts are valued at a total of $17.1 million.

The first contract worth $7.2 million calls for Lockheed’s Information Systems and Global Services operating wing to develop a software for providing support to the Tactical Tomahawk Weapons Control System (:TTWCS).

The TTCWS is a sophisticated system that computes routes for Tomahawk cruise missiles to strike targets. It inputs new missions data into the system on-site and, on launching of the missile, is able to communicate with multiple Tomahawks to swiftly retarget and reposition the missiles in flight.

The second contract went to Lockheed’s Missiles and Fire Control division for the delivery of Joint Air-to-Surface Standoff Missile (:JASSM) Common Unique Planning Component software to the U.S. Air Force. This contract is priced at $9.9 million.

Previously, a basic ordering agreement was inked with the Air Force against which this current contract was awarded to Lockheed. The current contract is expected to be concluded by Jun 25, 2015.

As of now, the U.S. Air Force's B-1, B-2, B-52, F-16 and F-15E aircrafts are equipped with JASSM. Overseas, JASSM is certified on the F/A-18A/B for the Royal Australian Air Force.

Amidst the uncertainty regarding the defense budget, domestic contract flows for Lockheed has been low priced. The budget cutback will further increase in the future with the defense expenditure predicted to decline to $611.0 million in 2017 from $645.7 million in 2012.

Moreover, reverse engineering methods employed by China and Iran will enable these countries to offer low-cost defense products which might provide stiff competition to domestic U.S. companies like Lockheed.

However, the company secured a series of international contracts which will boost Lockheed’s growth opportunities. Recently, the joint establishment of Lockheed and Northrop Grumman Corp. (NOC), the LONGBOW Limited Liability Company received a $90 million contract from Saudi Arabia for the supply of LONGBOW Fire Control Radars (FCRs) for their AH-64 Apache Attack Helicopters.

Lockheed’s diversified business operations and combined order backlog of $21.2 billion at the end of the first quarter from the Missile and Fire Control as well as Information Systems & Global Solutions segments will contribute to a stable earnings stream. Presently, Lockheed carries a Zacks Rank #3 (Hold).

However, other defense operators well positioned in the industry are Zacks Ranked #1 (Strong Buy) Erickson-Air Crane Inc. (EAC) and Zacks Ranked #2 (Buy) Wesco Aircraft Holdings Inc. (WAIR).

Bethesda, MD-based Lockheed Martin is a security and aerospace company and engages in the research, design, development, manufacture, and integration of defense products.

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