Lockheed Unit Wins $215M Deal For CASS Support Services

Lockheed Martin Corp.’s (NYSE:LMT) unit, Mission Systems and Training, has won a contract from the U.S. Navy to provide services for up to 400 Consolidated Automated Support System (“CASS”) stations and 150 reconfigurable transportable CASS stations.

Contract Details

The contract has a ceiling value of $214.5 million. It was awarded by the Naval Air Warfare Center Aircraft Division, Lakehurst, NJ.

Per the contract, the company will provide performance-based logistics, maintenance and support services for the CASS stations, which will be used by the Navy and the governments of Australia, Finland, Kuwait, Malaysia, Italy and Spain.

The latest contract includes service purchases of about 88.5% for the U.S. Navy and Marine Corps; 4% for Kuwait; 3% Australia; 1.5% for Malaysia; and 1% each for Finland, Spain and Italy, under the foreign military sales program.

What’s CASS?

The CASS, developed by the Naval Air Systems Command (“NAVAIR”), is the Navy's original station in the CASS standard automatic test equipment family. It provides support to electronic systems at Intermediate Maintenance Activities (IMAs) both on shore and at sea. Its services also cover the Navy repair depots.

The Navy CASS is now being replaced by a newer version − the electronic CASS (eCASS), which will provide advanced modes of testing as well as enhanced weapon systems through the next 30 years. Maintainers will use the eCASS to troubleshoot and repair aircraft assemblies both at sea and on shore, thereby facilitating rapid and efficient return of equipment to readiness status.

Why Lockheed Martin?

Lockheed Martin focuses on providing reliable, capable avionics support with the CASS. The company has been working with the Navy to offer support for the CASS for quite a long time now. Also, the company has been awarded a number of contracts related to the CASS by the Navy.

Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus that guarantees a steady inflow of follow-on orders from a leveraged presence in the Army, Air Force, Navy and IT programs. The company witnesses persistently robust demand for its programs in the international markets.

We believe that Lockheed Martin has significant upside potential going forward, based on the U.S. government’s increased focus on Intelligence Surveillance Reconnaissance (ISR), unmanned systems, force protection, cyber security, and missile defense. Earlier, Lockheed Martin had stated its plan to increase the international mix from 21% in 2016 to 25% of the total sales in the upcoming years.

Meanwhile, the fiscal 2017 budget proposal reflects an annual increase of approximately $2.2 billion over the fiscal 2016 budget. This increased spending would be allocated to certain key areas that can unlock significantly higher opportunities for Lockheed Martin.

Zacks Rank & Key Picks

Lockheed Martin currently has a Zacks Rank #4 (Sell). A few better-ranked stocks in the aerospace and defense space include Engility Holdings, Inc. (NYSE:EGL) , General Dynamics Corporation (NYSE:GD) and Leidos Holdings, Inc. (NYSE:LDOS) .

Engility has witnessed a 3.6% rise in its stock price in the past one month. On an average, the company has delivered a positive earnings surprise of 12.09% in the trailing four quarters. Engility sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

General Dynamics carries a Zacks Rank #2 (Buy). The stock has gained 9.9% in its last three months. On an average, the company has delivered a positive earnings surprise of 6.54% in the trailing four quarters.

Leidos Holdings, a Zacks Rank #2 stock, saw a 1.5% upside in its stock price over the last one month. On an average, the company has delivered a positive earnings surprise of 7.93% in the trailing four quarters.

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