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Lockheed Martin Wins $327M Navy Deal to Design Aegis BMD 6.0

Zacks Equity Research

Lockheed Martin Corp’s. LMT Rotary and Mission Systems (RMS) unit recently clinched a $327-million contract to design and develop the Aegis Ballistic Missile Defense (BMD) 6.0 capability. Per the terms, the company will also integrate, test and certify the BMD 6.0 capability.

Work related to the deal will be executed in Moorestown, NJ, and is scheduled to be completed by December 2025. The contract was awarded by the Missile Defense Agency, Dahlgren, VA.

A Brief Note on Aegis BMD 6.0

AEGIS or Advanced Electronic Guidance and Instrumentation System is an integrated missile guidance system, which is used by the U.S. Navy and allied ships to protect the battle group. It is the world’s most advanced combat system and the only maritime ballistic defense system, which is capable of simultaneously attacking land targets, submarines and surface ships, while protecting the fleet against aircraft, cruise missiles and other ballistic missiles.

The Aegis BMD 6.0 provides increased ballistic missile defense capability by incorporating the air and missile defense radar, now designated SPY-6, on the first DDG Flight III. The Aegis BMD 6.0 will enable BMDS element utilization of AMDR data for remote engagement and supplement deployed assets with simultaneous multi-mission capabilities.

What Favors Lockheed Martin?

Heightened geopolitical tensions and increasing terrorist activities across the globe have compelled nations to strengthen their military arsenal, with missile systems constituting an integral part of it. The United States, being the largest exporter of military weaponry worldwide, follows a similar strategy. This is evident from the allotment of a $1.7-billion investment plan to purchase 37 Aegis Ballistic Missile Defense systems in the U.S. fiscal 2020 defense budget.

Courtesy of its renowned missile defense programs, the company’s RMS unit enjoys a steady flow of contracts from the Pentagon, which in turn boosts this segment’s top line. Evidently, in the second quarter of 2019, the RMS segment generated sales of $3.77 billion, led by a 6% year-over-year improvement in sales from integrated warfare systems.

Additionally, per ASD Media BV, the global Missiles and Missile Defense Systems (MMDS) market value is projected to see a CAGR of 6% to $93 billion by 2027 from 2018. Such growth can be attributed to heavy and frequent investments made by developing nations like the United States, China, Russia and Israel in the development of next-generation missiles and missile defense systems.

Notably, the aforementioned developments will enable Lockheed Martin to witness increasing demand for missiles and technical services, which should boost prospects, going ahead.

Price Performance

Shares of Lockheed Martin have gained 23.1% in the past 12 months compared with the industry’s growth of 11.9%.



Zacks Rank & Other Key Picks

Lockheed Martin currently carries a Zacks Rank #2 (Buy).

A few other similar-ranked stocks in the same space are Wesco Aircraft Holdings WAIR, Safran SA SAFRY and General Dynamics Corp. GD. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wesco Aircraft’s long-term growth estimates currently stand at 12%. The Zacks Consensus Estimate for 2019 earnings has increased 1.2% to 85 cents in the past 60 days.

General Dynamics’ long-term growth estimates currently stand at 8.7%. The Zacks Consensus Estimate for 2019 earnings has risen 0.93% to $11.88 in the past 60 days

Safran SA’s (SAFRY) Zacks Consensus Estimate for 2019 earnings has risen 3.84% to $1.62 in the past 60 days. Its year over year growth estimate for 2019 currently stands at 20.9%.

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