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Leidos (LDOS) Wins $358M Deal for Unmanned Undersea Vehicle

Leidos Holdings, Inc. LDOS recently clinched a contract from the U.S. Naval Sea Systems Command to construct an unmanned undersea vehicle(“UUV”). The work involved in the deal will be carried out in Lynnwood, WA.

Details of the Deal

Valued at $358 million, the contract involves designing and building a medium-size UUV for the U.S. Navy. Per the contract, Leidos will work in collaboration with L3Harris Technologies to develop this critical technology.

The work involved will further contribute to the U.S. Navy by supporting the intelligence preparation of the operational environment by providing submarine-based autonomous oceanographic sensing and data collection. The vehicle will also be bestowed with the capability of providing surface-launched and recovered mine countermeasures.

What’s Supporting Leidos Holdings?

Leidos is a leader in maritime autonomy and sensor integration and has a wide experience in naval architecture, hydrodynamics, survivability and modularity that assists the company in designing and developing the future generation of unmanned autonomous vessels.

Against this backdrop, these state-of-the-art unmanned autonomous vessels are being designed to support numerous alternate naval missions in addition to the as-designed anti-submarine warfare mission and are expected to provide an affordable, flexible warfighting solution for the future.

Such remarkable features must have led to a steady inflow of contracts for the company, like the latest one. This, in turn, should bolster its revenue generation prospects from the unmannedunderwater vehicle product line.

Growth Prospectus

The recent tiff between Ukraine and Russia has resulted in other nations to strengthen their defense landscape to deter any war-like situation. In this context, investments in undersea warfare capabilities have increased manifold since unmanned underwater vehicles play a critical role in military surveillance, thus aiding the military in carrying out undersea military missions efficiently.

Considering the current scenario and backed by such capabilities, UUVs are expected to witness a surge in demand going forward, which is further supported by the Markets and Markets research firm’s report that anticipates a CAGR of 16.4% in the unmanned underwater vehicle market over the 2020-2025 period.

Such growth trends may add to the perks of other players in the unmanned underwater vehicle market as well. Leidos apart, this brings the spotlight on Boeing BA, General Dynamics GD and Lockheed Martin LMT, which should reap the benefits of the expanding unmanned underwater vehicle market.

Boeing’s Echo Voyager is a fully autonomous extra-large unmanned undersea vehicle (XLUUV) class UUV that can be used for a variety of missions previously impossible due to traditional UUV limitations.

Boeing’s long-term earnings growth rate is pegged at 4%. Shares of BA have appreciated 31.1% in the past three months.

General Dynamics’ Bluefin SandShark is a one-person-portable, low-cost autonomous unmanned underwater vehicle designed to leverage today’s miniaturized sensors and emerge as the development platform for the next generation.

General Dynamics boasts a long-term earnings growth rate of 10.2%. GD shares have rallied 17.4% in the past year.

Lockheed Martin’s Marlin autonomous underwater vehicle system offers a range of civilian and military customers and a quick and safe way to conduct subsea surveys and inspections. The 10-feet-long submersible is highly maneuverable and can operate in tight spaces, sprint up to four knots and cruise for up to 18 hours. Marlin can perform up to four times faster inspections, delivering higher fidelity information in hours versus days.

Lockheed’s long-term earnings growth rate is pegged at 5.5%. LMT shares have surged 20.7% in the past year.

Price Movement

In the past year, shares of LDOS have rallied 3.6% against the industry’s fall of 33%.

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Zacks Rank

Leidos currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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