Lockheed Martin Corporation ( LMT )
has received a firm-fixed-price contract worth $755 million for
Patriot Advanced Capability-3 (PAC-3) missiles for foreign military
sale ("FMS").
Lockheed Martin manufactures combat-proven Patriot Advanced
Capability-3 (PAC-3) missiles under production contracts from the
U.S. Army, Air and Missile Defense Program. The PAC-3 Missile is
the most advanced, capable and powerful terminal air defense
missile. It can be used against tactical ballistic missiles, cruise
missile and aircrafts. The PAC-3 Missile is a high velocity
interceptor that counters incoming targets by direct, body-to-body
impact. The PAC-3 missile uses a solid propellant rocket motor,
aerodynamic controls, attitude control motors ("ACMs") and inertial
guidance to navigate.
The missile is currently used by 12 nations including the US,
Egypt, Germany, Greece, Israel, Japan, Kuwait, Netherlands and
Saudi Arabia. The missile also proved its efficiency during the
Iraq conflict.
In November 2012, under a FMS contract worth $9.9 billion, Qatar
had asked for 11 Patriot Configuration-3 modernized fire units, 11
AN/MPQ-65 radar sets, 11 AN/MSQ-132 engagement control systems, 30
antenna mast groups, 44 M902 launching stations, and 246 Patriot
MIM-104E guidance-enhanced missile-TBM (GEM-T) with canisters.
Also, the package included 10 PAC-3 test missiles with canisters,
11 electrical power plants (EPPII), 8 multifunctional information
distribution systems/low volume terminals (MIDS/LVTs), spare and
repair parts, as well as personnel training and training
equipment.
Earlier in July 2012, under a FMS program worth $4.2 billion,
Kuwait had requested a total of 60 PAC-3 missiles, 4 Patriot
radars, 4 engagement control stations, 20 launching stations, 2
information coordination centrals and 10 electric power plants. It
had also asked for communication and power equipment, personnel
training and equipment, spare and repair parts, as well as
logistics personnel services.
In both these contracts, Lockheed and Raytheon
Company ( RTN ) will serve as the principal contractors.
Besides improving bilateral relations, these contracts will also
bring in revenue for Lockheed Martin.
Lockheed Martin is the largest defense contractor in the world.
The company's customer base includes the U.S. government, foreign
governments, and other commercial buyers. Going forward, we expect
the company to register a stable performance driven by its
leveraged presence in the Army, Air Force, Navy and IT
programs.
However, like other defense peers, Lockheed also faces the fear of
major defense budget cuts and delays in execution of programs
leading to cost over-runs. The company presently retains a
short-term Zacks #3 Rank (Hold) that corresponds with our long-term
Neutral recommendation on the stock.
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