Lockheed Martin (LMT) Wins Contract to Aid Missile Production

Lockheed Martin Corp.’s LMT Space Systems business unit recently clinched a modification contract involving missile production. The award has been offered by the Strategic Systems Programs, Washington, D.C.

Details of the Deal

Valued at $99 million, the contract is expected to be completed by Feb 2, 2027. Per the terms of the deal, Lockheed will provide systems engineering, test planning and long lead material to support missile production.

A major portion of the work related to this deal will be executed in Denver, CO.

What’s Favoring Lockheed?

Nations are reinforcing their military capabilities to strengthen their defense structure in the growing threat environment. In this context, increased spending has been witnessed on missile capabilities, resulting in a significant order inflow for companies like Lockheed Martin, which enjoys a dominant position in the development of missiles.

To this end, it is imperative to mention that Lockheed’s weapon systems include precision strike weapons with long standoff ranges to keep pilots and aircraft out of harm's way.

Other missiles manufactured by Lockheed include air-to-air missiles to provide pilots with air supremacy; helicopter-launched anti-armor missiles to destroy enemy tanks and other armored vehicles; man-portable short-range anti-armor and assault weapons; kinetic energy hyper-velocity missiles that can defeat all current and future armored threats, hit-to-kill air defense systems that protect the troops from ballistic missiles, cruise missiles, enemy aircraft and weapons of mass destruction.

Such a varied number of missiles in its product portfolio has been ushering in solid order flow for Lockheed, involving missile production and other associated services like the latest one.

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.

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

LMT’s proficiency in manufacturing varied missiles, positions it favorably to capitalize on the growth opportunities offered by the missile and missile defense systems market. The fact that Lockheed is currently on track to double the production of its HIMARS to 96 per year and deliver more than 10,000 GMLRS by the end of 2024, and has increased Javelin’s production to 2,400 units per year, makes us confident about the company receiving more missile-related order flows in future, like the latest one. Such contract wins, in turn, are likely to boost revenue growth for the company’s MFC unit, which witnessed a solid 25.3% year-over-year top-line growth in the first quarter.

Opportunities for Peers

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

Northrop Grumman NOC: Northrop is a prominent developer of missile and counter systems, including strategic deterrents, subsystems and components. Its product portfolio includes the Integrated Air and Missile Defense Battle Command System, the Guided Multiple Launch Rocket System 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, RAM-guided missile weapon system, etc. In a partnership with BAE Systems, RTX has built the Excalibur artillery projectile, which increases precision, minimizes collateral damage and reduces the logistical burden for artillery forces.

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 3.8% against the industry’s 6.8% 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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