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Lockheed Martin Secures $63M Navy Deal for Production of USW

Zacks Equity Research

Lockheed Martin Corp.’s LMT Rotary and Mission Systems (RMS) business unit recently won a modification contract for the Navy’s Surface Ship Undersea Warfare (USW) system. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Valued at $63.1 million, the deal is expected to be completed by May 2020. Per the terms of the agreement, Lockheed Martin will provide incremental funding to support the continued development, integration and production of 15 AN/SQQ-89A(V) Surface Ship Undersea Warfare (USW) system. Majority of the work related to the deal will be executed in Manassas, VA.

A Brief Note on Surface Ship USW

Lockheed Martin’s Surface Ship USW combat system is a naval anti-submarine warfare designed to search, detect, classify and track underwater contacts. These warfare systems are also equipped to attack enemy submarines, mines and torpedoes.

The AN/SQQ-89(V) Surface Ship Anti-Submarine Warfare (ASW) Combat System provides integrated USW combat management, fire control, command and control, and onboard training to enable surface combatants for supporting engagement of USW targets in both open ocean and littoral environments. When installed on Aegis equipped destroyers and cruisers, the AN/SQQ-89(V) is integrated with the Aegis Combat System.

What Favors Lockheed Martin?

In recent times, heightened geo-political tensions looming across the globe and rapid modernization of China’s submarine fleet have compelled the United States to modernize its naval defense. Being one of the major manufacturers for maritime combat and undersea warfare systems, Lockheed Martin hugely benefits from such modernization initiatives, in terms of significant contract wins.

Moving ahead, factors like growing disputes over maritime borders, offshore resources and trade routes are expected to boost the global demand for USW systems.  Notably, the United States is a forerunner in the global undersea warfare systems market. In this line, Research and Markets firm expects the global undersea warfare systems market to witness a CAGR of 6.6% over the 2017-2021 period and attain a value worth $8.26 billion by 2021. Being the Pentagon’s largest defense contractor, Lockheed Martin is expected to capture a sizeable share of this expanding market and fortify its dominant position in the defense space.

Price Performance

In a year’s time, shares of Lockheed Martin have gained 5.7% against the industry’s 3.2% decline.

 

Zacks Rank & Other Key Picks

Lockheed Martin currently carries a Zacks Rank #2 (Buy). A few other top-ranked companies in the same space are Leidos Holdings, Inc. LDOS, Northrop Grumman Corp. NOC and Wesco Aircraft Holdings, Inc. WAIR, each carrying a similar rank as Lockheed Martin. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 1.1% up to $4.58 over the past 60 days.

Northrop delivered average positive earnings surprise of 18.50% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 1.8% to $19.29 over the past 90 days.

Wesco Aircraft’s long-term growth estimate currently stands at 12%. The Zacks Consensus Estimate for 2019 earnings has moved 3.7% north to 84 cents over the past 90 days.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
 
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