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Lockheed Martin's Sikorsky Wins $3.8B Contract for Blackhawk

Defense major Lockheed Martin Corp.’s LMT business unit, Sikorsky Aircraft, recently secured a contract for multi-year production of Black Hawk helicopters.

Details of this Deal

Valued at $3.8 billion, this foreign military sales (FMS) contract to Saudi Arabia was awarded by the Army Contracting Command, Redstone Arsenal, AL.

Per the contract, Sikorsky Aircraft will also provide services related to program system management, engineering, technical data and publications.

The contract will utilize fiscal 2010 and 2017 other funds to finance the work, which is likely to be executed in Stratford, CT. It is scheduled to be completed by Jun 30, 2022.

A Brief Note on Blackhawk

Originally developed and manufactured by Sikorsky, the Blackhawk helicopter has been the work-horse for the U.S. Army, performing multi-mission tactical operations since 1978. There are numerous variants of this product line, which has been successfully serving the nation as well as foreign governments.

While UH-60 is one of the legacy Blackhawk models, UH-60M is a modified version of this family of copters. It is a twin-engine, medium-lift utility copter that offers fail-safe service, during both day and night, in the harshest weather conditions, anywhere in the world.

Notably, among other models of the Blackhawk, UH-60M is the most efficient, thanks to its integrated digital cockpit, moving map display, enhanced GPS/INS system, fully integrated flight controls and superior vertical lift.

Our View

We remind investors that Lockheed Martin purchased Black Hawk helicopter maker, Sikorsky Aircraft, from United Technologies Corp. UTX in Nov 2015. The deal boosted the former company’s position as the world’s largest defense contractor, further strengthening its military helicopter business. In fact, this acquisition added Sikorsky’s world-known aircraft, Black Hawk, along with a handful of combat and commercial choppers, to Lockheed Martin's helicopter product line.

Moreover, management expects to witness improved cash flows from the Sikorsky business unit in 2018, indicating possibilities of business expansion in the near term. We believe such generous fund flows from Pentagon, in the form of contracts, can certainly help the company achieve its desired business expansion, going ahead.

Price Movement

Lockheed Martin's stock was up about 11.3% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry's gain of 24.9%. This could be because the earlier budget cuts have put pressure on the top line although the present defense budget is more in favor of the sector. Also, budget deficits and political uncertainty make future defense budgets vulnerable to cutbacks. As a result, Lockheed Martin's performance lagged behind the likes of General Dynamics Corp. GD and The Boeing Co. BA that have outperformed the industry.

Zacks Rank

Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here 

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