Lockheed (LMT) Secures a $332M Deal to Aid GMLRS Program
Lockheed Martin Corp.’s LMT Missiles and Fire Control (MFC) business segment recently clinched a modification contract for the Guided Multiple Launch Rocket System (GMLRS). The award has been offered by the Army Contracting Command, Redstone Arsenal, AL.
Valued at $332 million, the contract is expected to be completed by Oct 20, 2027.
What’s Favoring Lockheed?
Nations are reinforcing their military capabilities to strengthen their defense structure in the growing threat environment. In this context, increased spending has been witnessed on missile capabilities, resulting in a significant order inflow for companies like Lockheed Martin, which enjoy a dominant position in the development of missiles.
To this end, it is imperative to mention that LMT’s GMLRS is a combat-proven, highly accurate, all-weather, precision-guided rocket system, which is capable of delivering precision strikes farther than many conventional weapons. Notably, the company’s MLRS Family of Munitions includes a variety of precision-strike rockets and missiles, with ongoing evolutionary development to meet the needs of today’s warfighter. Impressively, GMLRS rockets boast a reliability rate of more than 98%.
Such remarkable features of the GMLRS are likely to have been boosting its demand significantly. This can be gauged from the fact that more than 60,000 GMLRS rockets have been produced to date.
What Lies Ahead?
The global peace index reflects an unstable environment worldwide with the Russia-Ukraine war continuing for more than two years now, in addition to the ongoing hostility prevalent in different parts of the Middle East. This has set the stage for the defense sector to witness rising demand for military products, particularly missiles, as nations worldwide strive to protect their borders from unprecedented attacks.
This should bode well for the missile industry, as evident from the Mordor Intelligence firm’s projection, which suggests a CAGR of 5% over the 2024-2029 period for the missile and missile defense systems market.
LMT’s proficiency in missile manufacturing, particularly that of GMLRS, positions it favorably to capitalize on such growth opportunities. The fact that Lockheed Martin is working with the U.S. Army to increase GMLRS production capacity to 14,000 per year in 2025 makes us confident that the company will witness more order flows for its GMLRS product, like the latest one. Such contract wins, in turn, are likely to boost revenue growth for the company’s MFC unit, which witnessed a solid 25.3% year-over-year growth in its top line in the first quarter.
Opportunities for Peers
LMT apart, other prominent defense contractors that stand to benefit from the expanding missile and missile defense systems market are as follows:
Northrop Grumman NOC: Northrop is a prominent developer of missile systems and counter systems, including strategic deterrents, subsystems and components. Its product portfolio includes the Integrated Air and Missile Defense Battle Command System, the Guided Multiple Launch Rocket System propulsion and warhead subsystems, the Hypersonic Attack Cruise Missile, the Advanced Anti-Radiation Guided Missile and a few other combat-proven products that support missile defense systems.
NOC boasts a long-term earnings growth rate of 9.9%. The Zacks Consensus Estimate for Northrop’s 2024 sales indicates an improvement of 4.6% from the 2023 reported figure.
General Dynamics GD: General Dynamics’ Ordnance and Tactical Systems is the system integrator of the 2.75-inch Hydra-70 family of rockets. It also produces composite rocket motor cases and launch tubes for tactical and strategic missiles.
GD has a long-term earnings growth rate of 11%. The Zacks Consensus Estimate for General Dynamics’ 2024 sales indicates an improvement of 10.5% from the 2023 reported figure.
RTX Corp. RTX: RTX’s business unit, Missiles and Defense, is a prominent U.S. missile maker. Its portfolio includes the AIM-9X Sidewinder missile, the AIM-9X Block II missile, RAM-guided missile weapon system, etc.
RTX boasts a long-term earnings growth rate of 10.3%. The Zacks Consensus Estimate for its 2024 sales indicates an improvement of 6.2% from the 2023 reported figure.
Price Movement
In the past year, shares of Lockheed Martin have risen 4.1% against the industry’s 7.9% decline.
Image Source: Zacks Investment Research
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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