Lockheed Wins Space Radar Contract - Analyst Blog

Prime defense contractor Lockheed Martin Corp. ( LMT ) outmatched its rival bidder Raytheon Company ( RTN ) to clinch a big ticket contract for building a radar system to track space junk. The contract, valued at a whopping $915 million, involves creating a radar system at the Marshall Islands located in northern Pacific Ocean.

The tracking system will be operational by 2018. Lockheed Martin is also contemplating to build another radar facility in Australia. The new ground-based radar program, known as space fence, will be capable of identifying smaller debris than the Air Force's existing system operating since 1961.

The program is a top priority for the U.S. government as orbiting objects traveling at a speed of 17,500 miles per hour are increasing collision risks with satellites and International Space Station.

We note that the previous tracking systems could detect roughly 20,000 waste objects in the space while the new advanced version could spot up to 200,000 objects. Space fence will prove to be critical for the smooth running of major defense satellite programs as well as maneuvering of space stations.

The Space Systems continues to capture the government's attention as the Department of Defense intends to develop a more resilient space division to face the emerging security threats. For fiscal 2015 defense budget, proposed investments for Space programs were flat compared to 2014.

This stimulus is pushing Lockheed Martin to expand its satellite product coverage through constant technological innovation as well as acquisitions. The company's Advanced Extremely High Frequency (AEHF) military satellite program is shaping up well with its AEHF-4 projected to launch in 2017. The company boasts the AEHF to be the most secure communication satellites used by the government.

Meanwhile, the recent strategic purchase of Astrotech Space Operations ("ASO") reflects Lockheed Martin's efforts to increase market penetration. With the U.S. government retaining the company's key programs, Lockheed Martin looks poised for a stable growth amidst the defense sequestration.

Currently, the company carries a Zacks Rank #3 (Hold). Other better-placed defense operators include Spirit AeroSystems Holdings, Inc. ( SPR ) and CAE Inc. ( CAE ). Both the stocks hold a Zacks Rank #2 (Buy).

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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.

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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