Lockheed Martin Corp.’s LMT Rotary and Mission Systems (RMS) business unit recently won a $212-million modification contract for incorporating and integrating an Aegis weapon system, J7 baseline for Japan’s maritime Self-Defense Force (JMSDF). The contract was awarded by the Naval Sea Systems Command, Washington, DC and is expected to get completed by October 2021.
Per the deal, Lockheed Martin will provide full operational capability at the development test sites, integration of Japanese domestic ship systems, support and provision of technical manuals, logistics, and staging activities. Majority of the work related to the deal will be performed in Moorestown, NJ.
A Brief Note on Aegis System & J7 Baseline
Aegis is the world’s most advanced combat system that can simultaneously destroy land targets, submarines and surface ships along with providing protection from aircraft, cruise missiles and ballistic missiles. The computer-based command and decision providing ability is the key element of the AEGIS combat system. The Aegis Ballistic Missile Defense (BMD) system is the primary sea-based component of the U.S. missile defense system.
In a joint research program conducted by the United States and Japan, Lockheed Martin is developing an Aegis Baseline 9.C2 (BMD 5.1) variant computer program, referred to as J7, for the deployment on Japan’s Aegis destroyers.
What Favors Lockheed Martin?
In recent times, heightened geo-political 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 weaponries worldwide, follows a similar strategy. This is evident from the allotment of a $1.7-billion investment plan to purchase 43 Aegis Ballistic Missile Defense systems, in the U.S. fiscal 2019 defense budget.
Lockheed Martin's RMS segment carries out some of the company's high-profile programs, including the Aegis Combat System and other major military programs.
From the context of its relationship with Japan, the Aegis family of fleets has been Japan’s defense strength since 1993. Recently, the U.S. Defense Security Cooperation Agency announced that Japan will purchase Aegis ballistic missile defense systems, which is worth an estimated $2.15 billion. This would bolster the nations existing sea-based Aegis capabilities.
Such major developments and continuous upgradation for the Aegis Combat System along with the growing commercial relationship with Japan, including the latest contract, are likely to boost Lockheed Martin’s top-line growth in the days ahead.
Lockheed Martin’s stock has fallen about 13.2% in the past year compared with the industry’s decline of 1%.
Zacks Rank & Key Picks
Lockheed Martin currently carries a Zacks Rank #3 (Hold).
A few better-ranked companies in the same sector are The Boeing Company BA, Northrop Grumman Corporation NOC and Triumph Group, Inc. TGI.
While Boeing sports a Zacks Rank #1 (Strong Buy), Northrop Grumman and Triumph Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boeing delivered average positive earnings surprise of 17.08% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 9.24% to $19.74 in the past 90 days.
Northrop Grumman came up with average positive earnings surprise of 19.93% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 7.2% to $19.09 in the past 90 days.
Triumph Group’s long-term growth estimates currently stand at 4.80%. The Zacks Consensus Estimate for 2019 earnings has increased 1.23% to $1.64 in the past 30 days.
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