Defense prime Lockheed Martin Corp. ‘s LMT Space Systems business unit secured a modification contract for new procurement of Trident II (D5) missile production, D5 life extension production and D5 deployed systems support. Work related to this deal is expected to be over by Sep 30, 2022.
Details of the Deal
Valued at $418.7 million, the contract has been awarded by the Strategic Systems Programs, Washington, D.C. It includes base items and all option items, which if exercised, will enhance the total value of the modification to $1.1 billion.
Per the terms of the agreement, majority of the work will be executed in Sunnyvale, CA and Cape Canaveral, FL. The remaining part will be carried out at different other regions of the United States.
Fiscal 2017 weapons procurement (Navy) and United Kingdom funds will be utilized to complete the task.
A Brief Note on Trident II (D5)
Trident II (D5) is the latest generation of submarine-launched fleet ballistic missiles, developed and produced by Lockheed Martin. It was first deployed in 1990 and is currently aboard the OHIO-class and British VANGUARD-class submarines.
Markedly, these missiles are equipped with multiple independently targetable re-entry vehicles (MIRV) and thermonuclear warheads.
What’s Favoring Lockheed?
Lockheed Martin’s Space Systems unit is the prime contractor of the Navy’s Trident missile. The company supplies technical and logistical support at sites where the missiles are deployed.
In September 2016, the Navy launched an unarmed Trident II D5 Fleet Ballistic Missile, following which Lockheed Martin announced that it is building on a 60-year partnership with the Navy. The declaration was made to ensure that the missile system remains capable for decades through the company’s shared robust flight test plan.
Going forward, we expect the latest contract to substantially boost the company’s growth trajectory. Also, the defense prime remains confident of winning more of such contracts in the near term, given that Trident II (D5) is one of the most advanced U.S. Navy’s missile system.
Lockheed Martin’s stock has returned 29.4% in the last one year, underperforming the 50.5% rally of the industry it belongs to. This may have been caused by the company’s F-35 program, which despite being a prime project of the U.S. government has been repeatedly criticised for being overtly expensive.
Zacks Rank & Stocks to Consider
Lockheed Martin carries a Zacks Rank #3 (Hold). Better-ranked stocks in the aerospace and defense sector include Engility Holdings, Inc. EGL , Leidos Holdings, Inc. LDOS and Northrop Grumman Corp. NOC . While Engility Holdings and Leidos Holdings sport a Zacks Rank #1 (Strong Buy), Northrop Grumman holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .
Engility delivered an average positive earnings surprise of 23.50% in the last four quarters. The Zacks Consensus Estimate for current-year earnings moved up 2.3% in the last 60 days.
Leidos Holdings delivered an average positive earnings surprise of 18.01% in the last four quarters. The Zacks Consensus Estimate for current-year earnings climbed 1.1% in the last 30 days.
Northrop Grumman pulled off an average positive earnings surprise of 12.60% in the last four quarters. Its 2017 earnings estimates inched up 0.2% in the last 30 days.
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