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Lockheed Martin's Sikorsky Wins Contract for UH-60M Aircraft (revised)

Zacks Equity Research

Lockheed Martin Corp.’s (LMT) business unit, Sikorsky Aircraft, recently secured a contract for manufacturing eight UH-60M aircraft for Saudi Arabian National Guard Forces and nine similar aircraft for the Royal
Saudi Land Forces Airborne Special Security Forces.

Details of the Deal

Valued at $193 million, this foreign military sales (FMS) contract to Saudi Arabia was awarded by the Army Contracting Command, Redstone Arsenal, AL.

The contract will utilize fiscal 2018 foreign military sales to fund the work, which is likely to be executed in Stratford, CT. Work related to the deal is scheduled to be completed by Dec 31, 2022.

A Brief Note on UH-60M Aircraft

The UH-60M Blackhawk helicopters are an upgraded version of combat-proven UH-60 helicopter. The Multi-mission UH-60M is the latest in the Black Hawk helicopter family and is more capable, survivable, maintainable, powerful and effective than its predecessors. The UH-60M provides additional payload and range, advanced digital avionics, better handling qualities and situational awareness, active vibration control, improved survivability and improved performance using high-speed machined parts.

The centerpiece of the UH-60M Black hawk helicopter is an advanced digital avionics suite that provides improved situational awareness and interoperability with the Future Combat System. It is more effective with its integrated digital cockpit, moving map display, enhanced GPS/INS system and fully coupled flight controls.

Our View

Lockheed Martin had acquired Sikorsky Aircraft from United Technologies Corp. in November 2015 that boosted the former’s position as the world’s largest defense contractor, strengthening its military helicopter business. The acquisition added Sikorsky’s world-known aircraft, Black Hawk, along with different variants of combat and commercial choppers to Lockheed Martin's helicopter product line.

In the third quarter of 2017, the Sikorsky business saw a drop in net sales margin. However, for 2017, the company has increased its sales outlook, on expectations of contributions from its Rotary and Mission Systems (RMS) unit, which includes the Sikorsky unit. We believe generous fund flows from Pentagon, in the form of contracts like the latest one, will allow Lockheed Martin to make a rebound in the RMS business unit.

Price Movement

Lockheed Martin’s stock has moved up about 32.1% in a year, compared with the broader industry’s gain of 53.9%. This underperformance may have been caused by intense competition that the company faces for its broad portfolio of products and services in the domestic and international markets.

Zacks Rank & Key Picks

Lockheed Martin carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the same space are Aerojet Rocketdyne Holdings, Inc. AJRD, sporting a Zacks Rank #1 (Strong Buy), and Curtiss-Wright Corp. CW and Spirit Aerosystems Holdings, Inc. SPR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne posted an average positive earnings surprise of 19.27% over the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 20 cents over the past 90 days.

Curtiss-Wright posted an average positive earnings surprise of 11.78% in the past four quarters. The Zacks Consensus Estimate for 2018 earnings rose by 24 cents over the last 90 days.

Spirit Aerosystems has an average positive earnings surprise of 4.52% for the past four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 24 cents in the last 90 days.

 

(NOTE: We are reissuing this article to correct a mistake. The original version, published yesterday, Januray 15, 2018, should not be relied upon.)

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