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Lockheed Martin Wins $29M B-2 Defense Management System Deal

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Lockheed Martin Corp. LMT recently won a $28.6 million contract for modernizing the B-2 stealth bomber defense management system. The contract was awarded by the Tinker Air Force Base, Oklahoma City, OK.

Work related to the deal will be performed in Owego, NY and is expected to be completed by Jul 9, 2020. Lockheed Martin will utilize fiscal 2018 working capital funds for completing the task.

Brief Note on B-2 Defense Management System Overhaul

The B-2 Defensive Management System Modernization/Overhaul (DMS-M) program maintains the B-2 direct attack capability while addressing emerging threats from enemy air defenses. DMS-M program upgrades the Electronic Support measures, antennas and display processing units. From a broader perspective, the B-2 DMS-M provides the B-2 fleet with advanced situational awareness, improved supportability, enhanced lethality, increased platform survivability and networked battle-space awareness. The prime contractor for the U.S. Air Force B-2 Spirit stealth bomber is Northrop Grumman NOC, which uses Lockheed Martin’s B-2 DMS-M program.

Our View

Lockheed Martin’s Rotary and Mission Systems (RMS) unit is engaged in providing design, service and support for a variety of mission systems, and radar sensors for rotary and fixed-wing aircraft. We believe the latest system modernization deal will enable the segment to technologically improve other sensor-based programs offered by the company.

Steady and regular order inflows tend to fuel RMS segment’s top-line growth. Notably, the company’s RMS segment recorded first-quarter 2018 sales of $3.2 billion, reflecting a 3% improvement from the year-ago quarter on account of higher sales for its sensor and C6ISR programs. In line with this, we may expect the latest contract to boost RMS’s revenue growth in the days to come, as well.

Price Movement    

Lockheed Martin’s stock has improved about 7.8% in the last year compared with the industry’s growth of 30.4%. The underperformance may have been caused by the intense competition the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically as well as internationally.

Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Wesco Aircraft Holdings WAIR and Engility Holdings EGL.

While Wesco Aircraft Holdings sports a Zacks Rank #1 (Strong Buy), Engility Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

Engility Holdings came up with an average positive earnings surprise of 15.08% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 0.5% to $1.91 in the last 90 days.

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