Lockheed Martin Corp.’s LMT business segment, Rotary and Mission Systems, recently clinched a modification contract involving AEGIS combat system. Valued at $30.5 million, the deal has been awarded by Naval Sea Systems Command, Washington, D.C.
Per the deal, LMT will provide capability package development and fielding, system integration and fielding, and in-service sustainment services for AEGIS combat system. The contract is expected to be completed by Dec 31, 2024. The work related to the deal will be carried out in Moorestown, NJ.
What’s Favoring Lockheed?
As nations across the globe are increasing their defense budget to strengthen their warfare capabilities, spending on combat systems has increased. This contributes to growth of defense companies that are into manufacturing of efficient combat systems, which boast capabilities to address enemy threats.
In this context, it is imperative to mention that LMT’s Aegis Combat System is the U.S. Navy’s most modern surface combat system. It is also the first fully-integrated combat system built to defend against advanced air and surface threats.
This weapon system has witnessed significant demand owing to its remarkable features that are most suitable for military missions. It includes missile launching element, computer programs, radar and displays that are fully integrated to work together. This demand has led to significant order inflow for the company, like the latest one.
Going forward, per the report from Mordor Intelligence firm, the naval combat system market is expected to witness a CAGR of more than 2.5% over the 2022-2027 period. This market growth prospect suggests a promising outlook for sustained order influx for LMT due to exceptional features of its Aegis combat systems.
Peer Prospects
Other defense companies that stand to benefit from the expanding naval combat system market are as follows:
Elbit Systems ESLT: Elbit Systems has more than three decades of experience in design and development of high-performance naval combat systems, including shipboard combat management systems, assuring information dominance over potential enemies, supporting a Common Tactical Picture, shortening decision cycles and executing rapid, accurate weapon engagement.
The Zacks Consensus Estimate for ESLT’s 2023 sales indicates an improvement of 5.1% from 2022 levels. The Zacks Consensus Estimate for Elbit’s 2023 earnings calls for 14.4% growth from 2022 figure.
BAE Systems BAESY: BAE Systems designs and manufactures naval ships and submarines as well as state-of-the-art combat systems and equipment. Its INTeACT combat management systems provide mission-critical capabilities and a vital advantage in combat systems.
BAE Systems boasts a long-term earnings growth rate of 13.6%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales indicates a 33.6% rise from 2022 actuals.
RTX Corp. RTX: RTX’s Missiles & Defense unit serves as the prime mission systems equipment integrator for all electronic and combat systems for the DDG 1000 program, America’s next-generation combat ship. The company provides warships with a computing environment, electronic modular enclosures, an integrated undersea warfare system, MK57 vertical launching system, an advanced gun system and an integrated power system.
RTX boasts a long-term earnings growth rate of 9.4%. The Zacks Consensus Estimate for the company’s 2023 sales implies a 10.5% rise from 2022 reported numbers.
Price Movement
In the past year, shares of Lockheed have decreased 7.5% compared with the industry’s 12.8% decline.
Image Source: Zacks Investment Research
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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