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Lockheed Martin (LMT) Wins Littoral Combat Ship Contract

Zacks Equity Research
Updated

Lockheed Martin Corp. LMT has secured a contract from the U.S. Department of Defense (DoD) to build another Littoral Combat Ship (LCS) at Fincantieri Marinette Marine. Although the value of this contract has not been disclosed, the DoD stated that it would not exceed the $564 million limit set by Congress.

Meanwhile, Australia-based global shipbuilding company Austal won a similar contract to build one LCS for the U.S. Navy. A variant of the LCS ship is being built at Austal USA’s yard in Alabama.

Lockheed Martin's contract covers the construction of one Freedom-variant LCS (LCS 25), along with integration and testing of selected ship systems, and equipment. The work is to be completed by Jul 2020.

Austal's contract on the other hand covers the construction of Independence-variant LCS ships, LCS 26, along with integration, testing and equipment. The work under this contract is expected to be completed by Jul 2020.

Both variants of the LCS ship can operate in shallower coastal waters and can perform surface warfare, mine hunting and anti-submarine operations. An LCS is a type of relatively small surface vessel intended for operations in the littoral zone. These are well designed to tackle rapidly changing global threats and provide a cost-effective solution in the current climate of volatile budget.

It is important to note here that the Navy is most likely to purchase 52 of the LCS ships, but government officials have told the Navy to cut that number. Recently, Defense Secretary Carter made a proposal to the Navy to cut purchases to 40. Navy officials have however held fast to their 52-ship target.

Zacks Rank

Lockheed Martin currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the defense space include TransDigm Group Incorporated TDG, AeroVironment, Inc. AVAV and Spirit AeroSystems Holdings, Inc. SPR. While TransDigm sports a Zacks Rank #1 (Strong Buy), AeroVironment and Spirit AeroSystems carry a Zacks Rank #2 (Buy).

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LOCKHEED MARTIN (LMT): Free Stock Analysis Report
 
TRANSDIGM GROUP (TDG): Free Stock Analysis Report
 
SPIRIT AEROSYS (SPR): Free Stock Analysis Report
 
AEROVIRONMENT (AVAV): Free Stock Analysis Report
 
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