Lockheed's Sikorsky Unit Wins $525M Deal For UH-60M Aircraft

Lockheed Martin Corp.’s (NYSE:LMT) business unit, Sikorsky Aircraft recently secured a modification contract for supplying 38 UH-60M Army aircraft. The deal is scheduled to be completed by Jun 30, 2020 and will be executed in Stratford, CT.

Valued at $525.4 million, this contract includes an option for two UH-60M FMS green aircraft. The deal has been awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.

A Brief Note on UH-60M Aircraft

The multi-mission UH-60M is the latest in the Black Hawk helicopter family and is more capable, survivable, maintainable, powerful and effective than its predecessors. The UH-60M provides additional payload and range, advanced digital avionics, better handling qualities and situational awareness, active vibration control, improved survivability and improved performance using high-speed machined parts.

The aircraft is the primary medium lift helicopter for the U.S. Army, performing a wide range of missions that encompass Air Assault, MEDEVAC, CSAR, Command and Control, and VIP transport. The centerpiece of the UH-60M Black hawk helicopter is an advanced digital avionics suite that provides improved situational awareness and interoperability with the Future Combat System.

Our View

Lockheed Martin had acquired Sikorsky Aircraft from United Technologies Corp (NYSE:UTX). in November 2015 that boosted the Lockheed’s position as the world’s largest defense contractor, strengthening its military helicopter business. The acquisition added Sikorsky’s world-known aircraft, Black Hawk, along with different variants of combat and commercial choppers to Lockheed Martin's helicopter product line. By virtue of this acquisition, Lockheed Martin enjoys a dominant position in the global combat helicopter market.

Notably, net sales from the company’s Sikorsky helicopter programs represented 9% of its consolidated net sales in 2019. Backed by increasing geo-political uncertainties across the globe and expanding defense budget provisions by the U.S. administration, we may expect to witness more generous fund flows, in the form of contracts like the latest one. This in turn will allow Lockheed Martin to witness solid growth in its Rotary and Mission Systems (RMS) business unit in the coming days. Impressively, the company expects RMS’ 2020 net sales to increase in the mid-single digit range above 2019 levels, driven primarily by Sikorsky business.

Price Movement

Lockheed Martin’s stock has moved up about 24.7% in a year against the industry’s decline of 16.2%.

Zacks Rank & Key Picks

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

A few better-ranked stocks from the same space are L3Harris Technologies (NYSE:LHX) , Leidos Holdings (NYSE:LDOS) and Northrop Grumman (NYSE:NOC) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

L3Harris delivered average positive earnings surprise of 5.28% over the last four quarters. The Zacks Consensus Estimate for 2020 earnings has moved up 1.8% over the past 60 days.

Leidos came up with average positive earnings surprise of 11.19% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has risen 3.1% over the past 60 days.

Northrop delivered average positive earnings surprise of 13.12% for the past four quarters. The Zacks Consensus Estimate for 2018 earnings has risen 1.4% in the past 60 days.

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