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Lockheed to Upgrade AN/SLQ-32(V)2

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Lockheed Martin Corporation (LMT) has received a contract worth $57 million from the U.S. Navy for upgrading the AN/SLQ-32(V)2 system that is installed on all U.S. aircraft carriers, cruisers, destroyers and other warships.

Under this Block 2 Surface Electronic Warfare Improvement Program (:SEWIP), Lockheed will upgrade the fleet's electronic warfare defenses against anti-ship missile threats. Besides establishing a framework to easily install future upgrades, this modernization process will ensure that the AN/SLQ-32 system continues to overcome threats. Task will be performed at the company's Syracuse, N.Y. facility.

Block 2 is the latest version of "blocks" that the Navy is pursuing for its shipboard electronic warfare system. In Nov 2009, Lockheed had received a contract to produce a preliminary design for SEWIP Block 2. Recently, the company completed successful integration and test activities for two engineering development models.

The original AN/SLQ-32 system was developed by Raytheon Company (RTN). It uses radar technology for early warning, identification and tracking of enemy threats. The system is fully compliant with the Navy's Product Line Architecture strategy and helps in rapid introduction of new technology into the fleet. In Jan 2012, Lockheed along with Raytheon decided to pursue the Navy's competitive SEWIP Block 3 program, which will upgrade the system's electronic attack electronic warfare capabilities.

Based in Bethesda, Md., Lockheed is a global security and aerospace company that is principally engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. The company’s customer base includes the U.S. government, foreign governments, and other commercial buyers.

Going forward, the company sees earnings growth in 2013, offers an incremental dividend payout and enjoys a stable order backlog. Also, we expect shareholder return to continue to be shored up by the company’s focus on debt repayment and its ongoing share repurchase program.

However, these positives will be offset by apprehension regarding defense cutbacks on high-cost platform programs and over-exposure to the Department of Defense budget. The company presently retains a short-term Zacks Rank #3 (Hold).

Other stocks worth considering are Wesco Aircraft Holdings, Inc. (WAIR) and Alliant Techsystems Inc. (ATK), both with a Zacks Rank #2 (Buy).

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