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Lockheed (LMT) Wins $4.1B Contract to Upgrade C2BMC System

Lockheed Martin Corp.’s LMT business segment, Rotary and Mission Systems, recently secured a contract involving its command and control, battle management and communications (C2BMC) system. The award has been offered by the Missile Defense Agency, Huntsville, AL.

Details of the Deal

Valued at $4.1 billion, the contract is expected to be completed by Apr 30, 2029, with an option to get extended through Apr 30, 2034. Per the terms of the deal, Lockheed will develop, model, integrate, test, verify, evaluate, validate, document, deliver, field, train, operate, sustain, and support updates and new capabilities to the C2BMC system.

Work related to this deal will be executed in LMT’s Colorado Springs, CO facility and a new facility in Huntsville, AL.

What’s Favoring Lockheed?

As nations across the globe have been rapidly strengthening their defense arsenal, thanks to widespread unrest witnessed in different parts of the world, the need for improved situational awareness for warfighters has increased manifold. This must have been the primary factor behind the increasing demand for state-of-the-art command and control monitoring systems like Lockheed’s C2BMC. The latest contract win is a bright example of that.

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Notably, LMT’s C2BMC is an operationally-proven, layered missile defense system that allows commanders to make synchronized decisions about threats at any range, in any phase of flight, from any location in the world.

The fact that C2BMC has nodes in over 30 locations across more than 48,000 miles of network communication lines surely reflects the solid utility that this product offers to a nation’s missile defense.

Considering the fact that the future of the evolving battlespace lies within the space domain, Lockheed is likely to outfit C2BMC-Next, the upgraded C2BMC under the latest contract, with technology that provides greater Space Domain Awareness. This should enable C2BMC-Next to offer faster, multi-domain coordinated responses to emerging threats.

What’s Ahead?

The need for more technologically advanced command and control (C2) monitoring systems has increased over the past few years, owing to notable improvements in communication technologies. Lately, geopolitical events like the Russian invasion in Ukraine and the ongoing unrest in the Middle East between Palestine’s Hamas group and Israeli militants have prompted the need for high-speed, low-latency communication systems.

To this end, the Mordor Intelligence firm expects the global command and control systems market to witness a CAGR of 2.3% during 2024-2029. This should bode well for Lockheed, with the company focusing on offering full spectrum battle management services for years. These range from enabling the Ballistic Missile Defense System to operate as a global network through C2BMC to aiding the unknown in Space to become known through iSpace.

As part of the company’s latest development in this domain, in May 2023, Lockheed successfully demonstrated digital C2 to synchronize joint all-domain fires during the U.S. Indo-Pacific Command’s (INDOPACOM) Northern Edge exercise near Alaska. The results are expected to support and shape future joint all-domain command and control (JADC2) capabilities.

Opportunities for Peers

LMT apart, other defense majors that enjoy a solid footprint in the C2 systems market and are thus expected to gain from this market’s expansion have been discussed below.

Northrop Grumman NOC: The company is a critical partner in delivering advanced C4ISR capabilities, systems integration and open architectures across multiple domains. For 60 years, Northrop Grumman has been a leader in the design, development and delivery of end-to-end communications & advanced networking capabilities for U.S. and allied military forces operating across multiple battlespace domains.

The stock boasts a long-term earnings growth rate of 10.1%. The consensus estimate for NOC’s 2024 sales is pegged at $41.09 billion, indicating an improvement of 4.6% from the previous year’s reported top line.

Leidos Holdings LDOS: It develops primary strategic C2 planning systems, including Aimpoint Construction System, processing the creation of aimpoints for strategic weapon applications and the Attack Structure Manager system. Within the Command, Control, Communications, Computers Intelligence, Surveillance and Reconnaissance (C4ISR) operation, the company provides innovative technologies, unique methodologies, and world-class software and services for customers in the broader intelligence, surveillance and reconnaissance community.

The stock boasts a long-term earnings growth rate of 9.3%. The Zacks Consensus Estimate for LDOS’ 2024 sales is pegged at $15.97 billion, implying an improvement of 3.5% from the previous year’s reported level.

L3Harris Technologies LHX: The company offers a complete maritime domain awareness C2 system. Its Vigilis is an efficient C2 system that monitors the movement of vessels around identified risk areas and regions to improve security and safety. It protects against and alerts to collisions, hostile vessels, smuggling, piracy, illegal immigration, obstruction of sea lanes, and pollution.

The stock boasts a long-term earnings growth rate of 8.5%. The consensus estimate for LHX’s 2024 sales is pegged at $21.22 billion, indicating an improvement of 9.3% from the previous year’s reported figure.

Price Performance

In the past six months, shares of LMT have risen 2.5% against the industry’s 0.2% decline.

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Zacks Rank

Lockheed currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

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Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report

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