Lockheed Martin Acquires $288M Apache Attack Helicopter Deal

Lockheed Martin Corp.’s LMT Missiles and Fire Control business unit recently won a $288.3 million modification contract for providing sensor systems along with other technical services for the Apache helicopter, to United Arab Emirates. The contract was awarded by the U.S. Army Contracting Command, Rock Island Arsenal, IL.

Details of the Deal

Per the terms of the deal, Lockheed Martin will provide the Modernized Target Acquisition Designation Sight/Pilot Night Vision Sensor (M-TADS/PNVS), subcomponents and technical services for the Apache attack helicopter. The contract was secured under the domestic and foreign military sales program.

Work related to the deal will be performed in Orlando, FL and is expected to be completed by Dec 31, 2021. Lockheed Martin will utilize fiscal 2018 foreign military sales and aircraft procurement (Army) funds for completing the task.

A Brief Note on the M-TADS/PNVS Systems

The Modernized Target Acquisition Designation Sight/Pilot Night Vision Sensor (M-TADS/PNVS), also known as Arrowhead, is a long-range, precision engagement and pilotage solution for missions operated during the day, night and in adverse weather conditions. Lockheed Martin’s electro-optical sensor provides enhanced situational awareness to Apache’s aircrew, with greater performance and survivability.

Advantages of the Apache Attack Helicopter

The AH-64 Apache Helicopter is the world’s most advanced multi-role combat helicopter,  which has been developed by Boeing BA, and is used by the U.S. Army and a growing number of international defense forces.  AH-64E is the latest version of the AH-64 gunship and is equipped with new improved sensors, avionics and night operation capabilities. Further, it possesses an infra-red suppressing exhaust system as well as chaff and flare dispensers, which jointly reduce the chance of being located and hit by enemy air-defense missiles.

What’s Favoring Lockheed Martin?

Steady and regular order inflows for Lockheed Martin’s MFC unit tend to fuel the company’s top-line growth. Notably, the company’s MFC segment recorded first-quarter 2018 net sales of $1.7 billion, reflecting a healthy 8% improvement from the year-ago quarter. In line with this, we may expect the latest contract to boost MFC’s revenue growth in the days to come.

Furthermore, the recently approved fiscal 2019 defense budget provisions for a spending plan of $21.7 billion on aircraft. In particular, the budget includes a prospective increase in investment for the AH-64E Apache Attack Helicopter, which has been allotted $1.3 billion. Lockheed Martin’s Apache fire control system provides the M-TADS/PNVS sensors along with other subcomponents for the Apache helicopter. These developments reflect substantial growth prospects for Lockheed Martin’s MFC segment, which, in turn, is likely to boost the company’s profit margin.

Price Movement    

Lockheed Martin’s stock has improved about 7.2% in the last year compared with the industry’s growth of 29.8%. The underperformance may have been caused by the intense competition that the company faces in the aerospace-defense space for its broad portfolio of products and services, both domestically and internationally.

Zacks Rank & Key Picks

Lockheed Martin currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Northrop Grumman NOC and Wesco Aircraft Holdings WAIR.

While Northrop Grumman sports a Zacks Rank #1 (Strong Buy), Wesco Aircraft Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman delivered an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 6.24% to $16.50 in the last 90 days.

Wesco Aircraft Holdings’ long-term growth rate is pegged at 12%. The Zacks Consensus Estimate for 2018 earnings has risen by 10% to 77 cents in the last 90 days.

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