Lockheed Martin Wins $92M Deal for PAC-3 Missile Support

Lockheed Martin Corp. LMT recently secured a $92-million modification contract for Phased Array Tracking on Radar to Intercept of Target (PATRIOT) Advanced Capability-3 (PAC-3) Missile Support Center. The deal is part of the U.S. logistics support missile repair and logistics support recertification.

Work related to the agreement is expected to be completed by Jun 8, 2019, while locations and funding for the task will be determined with each order. The contract has been awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.

A Brief Note on PAC-3 Missiles

The PAC-3 missile system is a long range, air defense and medium to high-altitude guided missile system. It is developed to counter tactical ballistic missiles, cruise missiles and advanced aircraft. The system’s radar set provides tactical functions of airspace surveillance, target detection, identification, classification, tracking, missile guidance and engagement support.

Per Lockheed Martin, the PAC-3 Missile Segment Enhancement (PAC-3 MSE) interceptor has a two-pulse solid rocket motor that can target the object to be destroyed from high altitude and range. The company anticipates that demand for this advanced missile system to be high, particularly in politically tense regions of the Middle East.

Our View

Being one of the forerunners in the missile defense space, Lockheed Martin’s Missile and Fire Control (MFC) unit manufactures advanced combat, missile, rocket, manned and unmanned systems for military customers for the U.S. government and foreign allies. In relation to the aforementioned contract win, it is worth mentioning that PAC-3 is among the company’s top-notch missile systems.

Coming to this missile systems’ performance in recent times, PAC-3 team achieved several notable milestones in the first quarter of 2018. Evidently, Lockheed Martin won an award of over $500 million from the U.S. and international customers for upgradation of their missile defense capabilities using the company’s PAC-3 and PAC-3 missile segment enhancement (MSE), interceptors, lot kits, spares and support equipment.

Moreover, Lockheed Martin signed major agreements with the U.S. and Polish officials, under which Poland became the fifth international PAC-3 MSE customer. Needless to say, such inflow of orders tends to fuel the top line of Lockheed Martin. Evidently, the company’s MFC segment, recorded first-quarter 2018 net sales of $1.7 billion, reflecting a solid 8% improvement from the year-ago quarter.

Considering the company’s latest contract win, we may expect the MFC segment to keep its trend of delivering positive top line growth in the second quarter of 2018 as well.

In February 2018, President Trump proposed a fiscal 2019 defense budget that provides for an investment plan of $1.1 billion for procuring 240 PAC-3 MSE. With widespread geo-political conflicts across the globe, such funding provisions is likely to keep Lockheed Martin on a growth trajectory.

Price Performance

Shares of Lockheed Martin have rallied about 17.4% in a year, compared with the broader industry’s 36.9% growth. The underperformance was caused by intense competition in the domestic and international markets.

 

 

Zacks Rank & Stocks to Consider    

Lockheed Martin currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are AeroVironment AVAV, Boeing BA and Wesco Aircraft Holdings WAIR. While AeroVironment sports a Zacks Rank #1 (Strong Buy), Boeing and Wesco Aircraft carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment recorded an average positive earnings surprise of 147.43% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has risen by 10 cents to $1.00 in the past 60 days.

Boeing recorded an average positive earnings surprise of 29.51% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 56 cents to $14.61 in the past 60 days.

Wesco Aircraft recorded a positive earnings surprise of 29.41% in the last reported quarter. The Zacks Consensus Estimate for 2018 earnings has risen by 4 cents to 74 cents in the past 60 days.

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