Lockheed Martin Secures $1.1B Deal for GMLRS Production

Lockheed Martin Corp.’s LMT Missiles and Fire Control (MFC) business segment recently secured a Foreign Military Sales (FMS) contract for full-rate production of Guided Multiple Launch Rocket Systems (GMLRS). Work related to the deal is scheduled to be completed by Aug 31, 2021.

Valued at $1.1 billion, the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL. The entire task will be executed in Grand Prairie, TX. The contract will cater to Poland, Bahrain and Romania.

A Brief Note on MLRS

The Multiple Launch Rocket systems Family of Munitions includes three rockets and four missiles with an additional six variants in development. Primarily designed for fixed targets, GMLRS can be used to destroy enemy bunkers, troop locations, armored vehicles, equipment or other pertinent high-value targets.

Per a few sources, GMLRS was successfully used to destroy senior members of the Taliban during the Afghanistan war.

What’s Favoring Lockheed Martin?

In recent times, the importance of missile defense systems in the U.S. aerospace-defense market has gained significant traction. This upside can be attributed to advancements and integration of new tactical features followed by improved markets for cruise missiles, ballistic missiles, air to air missile, directed energy weapons and anti-satellite weapons. With Lockheed Martin being a prominent missile developer and the Pentagon’s largest defense contractor, increasing demand for missiles has been resulting in a significantly higher inflow of contracts.

As a result, revenues at the company’s MFC segment improved significantly. Notably, the MFC unit recorded 22% revenue growth in the fourth quarter of 2018. Moving ahead, we can expect this business segment to deliver similar top-line performance, based on consistent order flows from the Pentagon like the latest one.

Per ASD Media BV, the global Missiles and Missile Defense Systems (MMDS) market value is projected to see a CAGR of 6% to $93 billion by 2027 from the 2018 level. The uptick is likely to be driven by heavy and frequent investments made by countries like the United States, China, Russia and Israel toward the development of next-generation missiles and missile defense systems along with the largescale procurement made by countries like Saudi Arabia, India, Japan and South Korea.

Interestingly, MFC business segment continues to generate significant international interest. In 2018, international customers accounted for 26% of its net sales. The latest contract win is expected to maintain this trend.

Backed by the afore-mentioned developments and increasing demand for missiles, spare parts and technical services, defense contractors like Lockheed Martin are expected to deliver solid performances in the coming days.

Price Performance

In a year’s time, shares of Lockheed Martin have plunged about 10.2% compared with the industry’s 3.4% decline.

Zacks Rank & Key Picks    

Lockheed Martin currently carries Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are The Boeing Company BA, Spirit Aerosystems Holdings SPR and Heico Corporation HEI. While Boeing and Spirit Aerosystems sport a Zacks Rank #1 (Strong Buy), Heico carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boeing came up with average positive earnings surprise of 17.08% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 11.3% north to $20.13 over the past 90 days.

Spirit Aerosystems’ long-term growth estimate currently stands at 7.80%. The Zacks Consensus Estimate for 2019 earnings has climbed 3.7% to $7.56 over the past 90 days.

Heico Corporation’s long-term growth estimate currently stands at 12.10%. The Zacks Consensus Estimate for 2019 earnings has moved 5.9% up to $2.14 over the past 90 days.

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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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