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Lockheed Martin Secures Navy Deal to Support CH-53K Aircraft

Zacks Equity Research

Lockheed Martin Corp.’s LMT Sikorsky business unit recently secured a contract for procuring spare parts to repair and maintain CH-53K aircraft from the Lot III of the jet’s low-rate initial production. The deal was awarded by the Naval Air Systems Command, Patuxent River, Maryland.

Valued at $48.3 million, the contract is expected to be completed in August 2024. Majority of the work related to the deal will be executed in Quebec, Canada and various locations within the continental United States.

A Brief Note on the CH-53K Program

The CH-53K helicopter takes forward Sikorsky’s 50 years of manufacturing and operational success with its CH-53A, CH-53D/G and CH-53E predecessors. The new heavy lifter allows the U.S. Marine Corps and international militaries to move troops and equipment from ship to shore, and to higher altitude terrains more quickly and effectively. It is also effective for handling missions like humanitarian aid, troop transport, casualty evacuation, support of special operations forces, and combat search and rescue (CSAR).

What Favors Lockheed Martin?

In recent times, military helicopters in the U.S. aerospace-defense market have gained prominence and significant traction due to advancements and integration of new tactical, logistical and other important features. Some of these developments have also been made by Lockheed Martin, paving the way toward securing valuable helicopter-related contracts in recent times.

Such contracts are indicative of solid revenue growth prospects for the company’s Rotary and Mission Systems (RMS) business segment, which comprises the Sikorsky helicopters. Evidently, during second-quarter 2019, revenues at Lockheed Martin’s RMS unit increased a solid 6% year over year, with its Sikorsky helicopter programs being one of the primary growth contributors.

With the fiscal 2020 defense budget offering investment potential worth $57.7 billion in Aircraft, we may expect Lockheed Martin’s RMS unit to receive consistent order flows from the Pentagon like the latest one. This, in turn, should lead to similar top-line growth for the unit in the coming days.

Price Movement

In a year’s time, shares of Lockheed Martin have gained 17.7% compared with the industry’s 3.4% increase.

Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold). A few better-ranked companies in the same sector are Aerojet Rocketdynes Holdings, Inc. AJRD, Leidos Holdings, Inc. LDOS and Wesco Aircraft Holdings, Inc. WAIR. While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Leidos and Wesco Aircraft carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne delivered average positive earnings surprise of 25.46% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 13.8% to $1.90 over the past 90 days.

Leidos Holdings delivered average positive earnings surprise of 6.51% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 2.2% up to $4.68 over the past 90 days.

Wesco Aircraft’s long-term growth estimate currently stands at 12%. The Zacks Consensus Estimate for fiscal 2019 earnings has moved 1.2% north to 85 cents over the past 90 days.

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