Lockheed Martin Unit Wins $108M Air Force Deal For ARTS-V2

Lockheed Martin Corp.’s (NYSE:LMT) business unit, Missiles and Fire Control (MFC), has won a contract from the U.S. Air Force for Advanced Radar Threat System Variant 2 (ARTS-V2).

The contract is valued at $108.3 million. It was awarded by Air Force Life Cycle Management Center, Hill Air Force Base, UT. Per the contract, Lockheed Martin will offer services for the development and test of an ARTS-V2 production representative article. The agreement also includes options to manufacture up to 20 systems.

Work is scheduled to be completed by Jun 30, 2027 and will be performed at various locations across the U.S. The contract will use fiscal 2017 research, development, test, and evaluation funds.

Lockheed Martin & Radar Systems

Lockheed Martin’s radar systems offer advanced precision targeting, navigation, threat detection and next generation intelligence, surveillance and reconnaissance (ISR) capabilities. In fact, its radars and sensors have been designed and delivered to every armed service and operational environment. Currently, the company is developing the next generation of radars and sensors that can quickly detect, track, and classify threats.

Lockheed Martin enjoys steady flow of contracts from the Pentagon for its advanced radar systems. Evidently, it won a contract worth $1.58 billion from the U.S. Army to supply radars that track incoming rocket, mortar and artillery fire in Mar 2017.

Our View

Lockheed Martin’s MFC business unit derives a major portion of its revenue from its air and missile defense product line. In the first quarter of 2017, the MFC business segment generated sales of $1.5 billion, which represented almost 14% of Lockheed Martin’s total sales.

In fact, the company claims to be the world leader in missile defense, with its systems having achieved more than 100 successful intercepts in combat and flight testing since 1984 more than any other company and 50 successful target missions since 1996.

Being the Pentagon’s prime defense contractor, Lockheed Martin enjoys a lion’s share of the aerospace-defense industry in the U.S. The budget proposals for additional fiscal 2017 appropriations under which the White House requested an extra base budget of $24.9 billion and Overseas Contingency Operations (OCO) budget worth $5.1 billion amounted to the total budget appropriation of $30 billion. We believe that if this proposal is accepted it will surely boost Lockheed Martin’s revenue growth. Going forward, more of such contracts can be anticipated in the future, given that most of the company’s programs are the top priorities in the Pentagon’s missile system.

Price Movement

Lockheed Martin’s stock was up about 15.5% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry’s gain of 25.4%. This could be because the company faces intense competition for its broad portfolio of products and services domestically as well as internationally. Furthermore, the stock’s performance lags compared with that of The Boeing Co. (NYSE:BA) , General Dynamics Corp. (NYSE:GD) and Huntington Ingalls Industries, Inc. (NYSE:HII) , which surpassed the industry mark.

Zacks Rank

Lockheed Martin 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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