Leidos Holdings Inc. LDOS announced that it has received a $64 million contract from the U.S. Army to integrate, test and demonstrate the three complete Airborne Reconnaissance Low-Enhanced (ARL-E) systems. The work will be performed primarily at Aberdeen Proving Ground, MD.

Airborne Reconnaissance Low (ARL) is a manned multi-intelligence plane, which detects, identifies and tracks hostile ground targets using a variety of different sensors.

Per the contract, Leidos will be entrusted with integrating the Mission Equipment Payload (MEP) into the Bombardier DHC-8 aircraft, including testing and delivery of the complete ARL-E system. This contract has one-year base period of performance and two nine-month options if exercised. Under the option periods, Leidos will integrate the second and third MEP on ARL-E systems 2 and 3.

With the threat perception changing, the U.S. Army is required to upgrade the system it is presently using. The new generation of modular, multi-INT intelligence, surveillance and reconnaissance systems supplied by Leidos will help the army to remain ahead of the evolving-threat environment faced by the forces on the ground.

Thanks to its operational and technical expertise, Leidos can properly maintain and upgrade both manned and unmanned airborne systems.  These upgraded ARL-E systems will help the U.S. Army to successfully counter the military challenges faced mainly in the Western Pacific, Middle East and Africa.

Focus on Electronic Warfare

The U.S. Defense Department has been focusing on upgrading its existing electronic warfare capabilities across all platforms. Electronic warfare allows detecting the threat well in advance and neutralizing the same before it hurts the defense personnel.

Lockheed Martin LMT and General Dynamics GD, with their electronic warfare offering will be able to grab major shares of defense contracts of this nature.

Price Movement

In the last three months, Leidos returned 2.6% compared with the Zacks categorized Aerospace –Defense  industry’s gain of 10.0%.

Zacks Rank and Stock to Consider

Leidos currently carries a Zacks Rank #3 (Hold).

A better-ranked stock in the same space is Northrop Grumman Corporation NOC, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman reported average positive earnings surprise of 10.87% in the last four quarters. Its 2017 earnings estimates moved up 4.4% to $12.37 over the last 90 days.

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