Lockheed Martin Wins $3.4B Deal For PAC-3 Missile Systems
Zacks Investment Research | Dec 23, 2018 10:23PM ET
Lockheed Martin Corp. (NYSE:LMT) recently secured a $3.4 billion foreign military sales (FMS) contract for producing Phased Array Tracking Radar to Intercept on Target (NYSE:TGT) (PATRIOT) Advanced Capability-3 (PAC-3) missiles. The contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Albama.
Per the terms of the agreement, Lockheed Martin will also manufacture associated ground support equipment and initial spares in relation to the PAC-3 missiles. Work related to the deal is scheduled to be over by Dec 31, 2024. The tasks will be performed in Huntsville, Al; Camden, AR; Ocala, FL; Chelmsford, MA; Grand Prairie and Lukin, TX.
A Brief Note on PAC-3 Missiles
The PAC-3 missile system is an advanced defensive missile for the U.S. Army and international customers designed to intercept and eliminate incoming airborne threats using kinetic energy. The system’s radar set provides tactical functions of airspace surveillance, target detection, identification, classification, tracking, missile guidance and engagement support.
Notably, the latest version of this missile systems, the PAC-3 Missile Segment Enhancement (PAC-3 MSE) interceptor, comes with larger control fins and upgraded actuators that help in increasing maneuverability.
Our View
Being one of the forerunners in the missile defense space, Lockheed Martin’s Missile and Fire Control (MFC) unit manufactures advanced combat, missile, rocket, manned and unmanned systems for military customers of the U.S. government and foreign allies. Regarding the aforementioned contract win, it also worth mentioning that PAC-3 is one among the company’s top-notch missile systems.
Coming to this missile systems’ performance in recent times, the agreement signed by the U.S. and Swedish officials this August for delivery of PAC-3 MSE missiles to the government of Sweden, is imperative to mention. This deal made Sweden the sixth international customer to sign an agreement for Lockheed Martin’s PAC-3 MSE missiles, thereby reflecting this missile systems’ demand in overseas defense space.
Needless to say, such inflow of orders tends to fuel Lockheed Martin’s top-line performance. Evidently, the company’s MFC segment recorded third-quarter 2018 net sales of $2.27 billion, reflecting a solid 16% improvement from the year-ago quarter number. Considering the company’s latest contract win, we may expect the MFC segment to consistently deliver top-line growth in coming days as well.
Moreover, the fiscal 2019 defense budget provides for an investment plan of $1.1 billion for procuring 240 PAC-3 MSE. With widespread geo-political conflicts across the globe, such funding provisions is likely to keep Lockheed Martin on a growth trajectory.
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Price Performance
In a year’s time, shares of Lockheed Martin have lost about 19.3% against the Zacks Investment Research
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