Lockheed (LMT) Clinches a $1.9 billion Contract for HIMARS

Lockheed Martin Corp. LMT recently secured a modification contract for High Mobility Artillery Rocket Systems (“HIMARS”). The award has been provided by the Army Contracting Command, Redstone Arsenal, AL.
Valued at $1.93 billion, the contract is expected to be completed by May 31, 2028. 

What’s Favoring Lockheed?

Nations across the globe are reinforcing their military capabilities to strengthen their defense structure in the rapidly evolving threat environment worldwide. Since missiles play a very important role in military missions, the demand for these weapons systems and their associated parts has gained solid traction in recent times. This, in turn, has resulted in a significant order inflow (like the latest one) for Lockheed, which enjoys a dominant position in the field of missile development.

To this end, it is imperative to mention that LMT’s HIMARS is the most technically advanced, affordable and sustainable artillery solution that can fire Guided Multiple Launch Rocket System (“GMLRS”) rockets, ATACMS missiles, the next-generation Precision Strike Missile (PrSM) and Extended-Range GMLRS rockets. It boasts the capability to launch the entire Multiple Launch Rocket System family of munitions.

Such remarkable features of the HIMARS are likely to have been boosting its demand of late. This can be gauged from the fact that there are currently more than 600 HIMARS fielded systems worldwide.

Growth Prospect

The global peace index reflects an unstable environment worldwide, with the Russia-Ukraine war continuing for more than two years now, in addition to the ongoing hostility in different parts of the Middle East. This has set the stage for the defense sector to witness rising demand for military products, particularly missiles, as nations worldwide strive to protect their borders from unprecedented attacks. As the demand for missiles is on the rise, so is the demand for missile launchers like HIMARS.

Therefore, the growth prospect for the missile and missile defense systems market remains solid. To this end, the Mordor Intelligence firm projects the missile and missile defense systems market to witness a CAGR of 5% over the 2024-2029 period.

LMT’s proficiency in manufacturing missiles and associated missile launchers, particularly that of HIMARS, positions it favorably to capitalize on the growth opportunities offered by the aforementioned market. The fact that Lockheed remains on track to double the production of its HIMARS to 96 per year by the end of 2024, makes us confident that the company will witness more order flows for this product, like the latest one.

The company also excels in manufacturing air-to-air missiles, helicopter-launched anti-armor missiles, kinetic energy hyper-velocity missiles, hit-to-kill air defense systems, as well as cruise missiles. Such a varied number of missiles in its product portfolio will surely fetch more notable contracts for Lockheed in the near future, thereby bolstering its revenue generation prospects.

Opportunities for Peers

LMT apart, other prominent defense contractors that stand to benefit from the expanding missile and missile defense systems market are as follows:

Northrop Grumman NOC: Northrop is a prominent developer of missile systems and counter systems, including strategic deterrents, subsystems and components. Its product portfolio includes the Integrated Air and Missile Defense Battle Command System, the GMLRS propulsion and warhead subsystems, the Hypersonic Attack Cruise Missile, the Advanced Anti-Radiation Guided Missile and a few other combat-proven products that support missile defense systems.

NOC boasts a long-term earnings growth rate of 8.7%. The Zacks Consensus Estimate for Northrop’s 2024 sales indicates an improvement of 4.6% from the 2023 reported figure.

General Dynamics GD: The company’s Ordnance and Tactical Systems unit is the system integrator of the 2.75-inch Hydra-70 family of rockets. It is a key supplier of major strategic and tactical missile programs, ranging from warheads to missile housings to structural components to solid rocket motor cases.

GD has a long-term earnings growth rate of 12%. The consensus estimate for General Dynamics’ 2024 sales indicates an improvement of 10.5% from the 2023 reported figure.

RTX Corp. RTX: RTX’s business unit, Missiles and Defense, is a prominent U.S. missile maker. Its portfolio includes the AIM-9X Sidewinder missile, the AIM-9X Block II missile, the RAM-guided missile weapon system, etc.

RTX boasts a long-term earnings growth rate of 10.6%. The Zacks Consensus Estimate for its 2024 sales indicates an improvement of 6.2% from the 2023 reported figure.

Price Movement

In the past year, shares of Lockheed have risen 5.1% against the industry’s 7.4% decline.

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Zacks Rank

Lockheed currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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