Lockheed Martin Wins $2.45B Deal to Supply THAAD Interceptors
Lockheed Martin Corp’s. LMT
Missiles and Fire Control (MFC) business unit recently secured a
$2.46-billion modification contract for supplying Terminal High
Altitude Area Defense (THAAD) interceptors and associated one-shot
devices to the U.S. government and the Kingdom of Saudi Arabia
(KSA). The deal raises the contract value from $1.43 billion to
$3.89 billion.
Work related to the deal will be executed in Dallas, TX;
Huntsville, AL; Sunnyvale, CA, and other locations across the
United States. The contract, provided by the Missile Defense
Agency, Huntsville, AL, is scheduled to get completed by Apr 1,
2026.
What’s THAAD?
The Terminal High Altitude Area Defense (THAAD) system is an
anti-missile system that uses a hit-to-kill approach to shoot down
short, medium and intermediate ballistic missiles in their terminal
phase.
THAAD’s Demand in KSA
Toward the end of November 2018, Saudi Arabia signed a letter of
offer and acceptance (LOA) with the United States for procuring 44
THAAD launchers, missiles and related equipment, valued at
approximately $15 billion. During the fourth-quarter 2018 earnings
call, Lockheed Martin mentioned that it aspires to acquire large
THAAD orders from Saudi Arabia in 2019, possibly due to the rising
tensions looming over the Middle-East region and a possible Iranian
armed group expansionism.
These latest developments reflect strong demand growth witnessed by
Lockheed Martin’s THAAD system in the Middle-East region,
lately.
Looking Ahead
Also, in the domestic ground, Lockheed Martin’s THAAD system enjoys
strong demand. As a result, the company’s MFC business unit
witnesses solid top-line growth, with THAAD being a notable
contributor. In fact, the MFC segment generated sales of $2.43
billion, representing 22% year-over-year growth. Hence, we
may expect this unit to witness notable revenue growth in the near
term as well, courtesy of the aforementioned developments.
Per Research and Markets, the global missiles and missile defense
systems market is expected to increase to $93 billion by 2027, at a
CAGR of 6%, wherein missile defense systems is anticipated to be
the larger contributor. This is primarily due to the ongoing
procurement of missile and air defense systems by the Asia-Pacific,
North America and European regions. This, in turn, will increase
the demand for missile interceptors and other technical services.
Lockheed Martin, being a prominent missile manufacturer, is most
likely to benefit from such favorable projections, going
forward.
Price Performance
Shares of Lockheed Martin has dropped about 8.9% in a year against
the industry’s growth of 0.1%.
Zacks Rank & Key Picks
Lockheed Martin currently carries a Zacks Rank #3 (Hold). A few
better-ranked stocks in the same sector are Spirit Aerosystems
Holdings SPR, AeroVironment, Inc. AVAV and Heico Corporation
HEI.
While Spirit Aerosystems sports a Zacks Rank #1 (Strong Buy), Heico
and AeroVironment carry a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank stocks
here.
Spirit Aerosystems’ long-term growth estimates currently stand at
7.8%. The Zacks Consensus Estimate for 2019 earnings has risen 3.7%
to $7.56 in the past 90 days.
Heico Corporation came up with average positive earnings surprise
of 4.8% in the last four quarters. The Zacks Consensus Estimate for
2019 earnings has increased 2.9% to $2.14 in the past 90
days.
AeroVironment’ long-term growth estimates currently stand at 25%.
The Zacks Consensus Estimate for 2019 earnings has risen 16.67% to
$1.75 in the past 90 days.
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Lockheed Martin Corporation
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