Lockheed Martin Secures Deal to Support Aegis Weapon System

Lockheed Martin Corp.’s LMT Rotary and Mission Systems (RMS) business unit recently won an $18.8-million modification contract in connection to Aegis Combat Weapon System development. The contract was awarded by the Missile Defense Agency, Dahlgren, VA and is expected to get completed by Dec 31, 2020.

Per the deal, Lockheed Martin will continue performing engineering design support and analysis of alternative services necessary. This will aid in continuation of planning efforts and risk reduction efforts required to support the Aegis Ashore Japan analysis of alternatives and Foreign Military Sales. Work related to the deal will be performed in Moorestown, NJ.

Aegis System’s Significance

Aegis is an integrated missile guidance system used on U.S. Navy and allied ships to protect the battle group. It is the world’s most advanced combat system that can simultaneously destroy land targets, submarines and surface ships along with providing protection from aircraft, cruise missiles and ballistic missiles. The computer-based command and decision providing ability is the key element of the AEGIS combat system. The Aegis Ballistic Missile Defense (BMD) system is the primary sea-based component of the U.S. missile defense system.

U.S.-Japan Relation Aids Lockheed

The security alliance between Japan and the United States has been a cornerstone of peace and prosperity in the Asia-Pacific region for generations. Impressively, Lockheed Martin has been long enjoying a vital role in that alliance and working in partnership with local businesses.

In a joint research program conducted by the United States and Japan, Lockheed Martin is developing an Aegis Baseline 9.C2 (BMD 5.1) variant computer program, referred to as J7, for the deployment on Japan’s Aegis destroyers.

Notably, the Aegis family of fleets has been Japan’s defense strength since 1993. The Aegis Combat System has been providing advanced sea, air and undersea threat detection capabilities to Japan’s Kongo- and Atago-class ships for the last 25 years, with more opportunities in store. The latest contract win, which increased the value of the original contract to a solid $3.30 billion, surely bears a bright instance of such opportunity, thereby boosting Lockheed’s growth prospects.

Looking Ahead

In recent times, heightened geo-political tensions and increasing terrorist activities across the globe have compelled nations to strengthen their military arsenal, with missile systems constituting an integral part of it. The United States, being the largest exporter of military weaponries worldwide, follows a similar strategy. This is evident from the allotment of a $1.1-billion investment plan for Aegis Ballistic Missile Defense systems, in the U.S. fiscal 2021 defense budget.

It is imperative to mention in this context that such budget allocation will not only benefit Lockheed but also Raytheon Technologies RTX, which is the designated agent and manufacturer of two Aegis components, the SPY-1D(V) Transmitter and the MK 99 Fire Control System.

Price Movement   

Lockheed Martin’s stock has gained 4% in the past year against the industry’s decline of 27.8%.


Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold).

A few better-ranked companies in the same sector are Teledyne Technologies TDY and Ducommun Inc. DCO, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Teledyne delivered average earnings surprise of 11.7% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up 4.8% to $9.75 in the past 90 days.

Ducommun came up with average earnings surprise of 60.22% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has increased 18.5% to $2.18 in 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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