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Lockheed Wins $14M Modification Deal for AEGIS Weapon System

Lockheed Martin’s LMT segment, Rotary and Missions Systems (RMS) has been awarded a modification contract to exercise options for providing support services for Aegis Weapon System (AWS). The contract was awarded by Naval Sea Systems Command, Washington, DC.

The Contract Details

This modification contract is valued at $14.1 million. The funds for the contract will be obligated at the time of award from the fiscal 2017 research, development, test and evaluation (Navy) funds. The company will provide support for AWS baselines through advanced capability build 16.

90% of the work related to the contract will be carried out at company’s Moorestown, NJ and the rest 10% will be done at Washington, DC.

About Aegis Weapon System

AEGIS or Advanced Electronic Guidance and Instrumentation System is an integrated missile guidance system. It is primarily manufactured by Lockheed Martin and is used by U.S. Navy and allied ships to protect the battle group.

Over time, AEGIS has become an integral part of the U.S. Navy by evolving with new capabilities to counter emerging threats and leverage new technologies. Its latest configuration, Baseline 9, offers an open architecture framework to allow extreme flexibility.

Other than Lockheed Martin, another company working on AEGIS is Raytheon Company RTN. Earlier in June, the defense behemoth secured a contract in relation to a previously awarded delivery order for supplying production requirements associated with AEGIS modernization. (Read more: Raytheon Wins $25M Navy Deal to Support AEGIS Modernization)

Our View

Lockheed Martin's Rotary and Mission Systems business carries out some of the company's high-profile programs, including the Aegis Combat System, Littoral Combat Ship, MH-60 helicopter avionics along with military and commercial orders.

Currently, Lockheed Martin's Aegis system is the maritime weapon system choice for six powerful nations. Considering this and the above mentioned developments, we expect the latest contract to help management successfully attain sales target for the division.

Second-Quarter Earnings

Lockheed Martin reported second-quarter 2017 earnings of $3.23 per share, beating the Zacks Consensus Estimate of $3.10 by 4.2%. Earnings also surpassed the year-ago period’s bottom-line figure by 10.2%. In the reported quarter, total revenue came in at $12.69 billion, which surpassed the Zacks Consensus Estimate of $12.47 billion by 1.8%.

Some of the upcoming earnings releases from the same space are The Boeing Company BA and General Dynamics Corporation GD on Jul 26.

Boeing Company’s second-quarter Zacks Consensus Estimate is $2.31 per share and it has moved down by 2.5% in the last 30 days.

General Dynamics second-quarter Zacks Consensus Estimate is $2.43 per share and there has been no movement in the last 30 days.

Price Movement

Lockheed Martin's stock was up about 11.7% in the last one year, underperforming the Zacks categorized Aerospace/Defense industry's gain of 26.2%.

Zacks Rank

Lockheed Martin currently has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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