HomeMost PopularInvestingLockheed Martin's (LMT) $504M Contract Win to Support PAC-3 Missiles: A Financial...

Lockheed Martin’s (LMT) $504M Contract Win to Support PAC-3 Missiles: A Financial Insight

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Lockheed Martin Corp.’s (LMT) Missiles and Fire Control business unit has secured a modification contract worth $503.7 million to provide logistics support for the Patriot Advanced Capability-3 (PAC-3) missiles. The contract is awarded by the Army Contracting Command, Redstone Arsenal, AL, with an expected completion date of May 25, 2026.

The Favorable Outlook for Lockheed

The increasing global geopolitical and socioeconomic unrest has led both developed and developing nations to expand their military capabilities, with a particular emphasis on missiles. Lockheed’s Missiles and Fire Control business unit, renowned for developing, manufacturing, and supporting advanced combat missiles and rockets, has a strong position in meeting this demand. Notably, the PAC-3 missile, Terminal High Altitude Area Defense missile, JASSM, and LRASM are among its prominent products.

In 2022, 14 nations selected PAC-3 Cost Reduction Initiative and PAC-3 Missile Segment Enhancement (MSE) to bolster their missile defense capabilities. Furthermore, the recent agreement with Switzerland for the purchase of PAC-3 MSE missiles and related support equipment signifies the robust demand for PAC-3 in the missile market, leading to significant contract wins for LMT. These developments indicate promising revenue generation prospects for Lockheed Martin.

Growth Prospects and Market Projection

In July 2023, Lockheed announced the successful integration of its PAC-3 MSE interceptor with the AN/SPY-1 Radar, a crucial component in the Aegis Weapon System. This strategic integration aims to provide a proven, Integrated Air and Missile Defense capability with expanded capacity, benefiting the U.S. Navy and other U.S. allies’ naval defense units in efficiently countering advanced threats.

These initiatives are expected to position Lockheed as a key player in the growing global rocket and missiles market, projected to reach $77.4 billion in 2028 with a compound annual growth rate (CAGR) of 6.1% (source: Markets and Markets firm). This market projection indicates increased growth opportunities for major players including RTX Corp. (RTX), Northrop Grumman (NOC), and Boeing (BA) in the missile segment.

RTX offers a range of combat-proven missile defense systems, including the Patriot missile, Standard Missile-6, Standard Missile-3, Advanced Medium-Range Air-to-Air Missile, Evolved Seasparrow Missile, and the Tomahawk cruise missile. RTX boasts a long-term earnings growth rate of 9.4% and expects a sales improvement of 10.5% in 2023 compared to 2022.

Northrop Grumman manufactures air, sea, and land-based missile systems, propulsion control systems, and airborne missile warning systems. It also produces medium-class solid rocket motors for the U.S. Navy’s Trident II Fleet Ballistic Missile program, with a long-term earnings growth rate of 2.4% and a projected sales improvement of 6.4% in 2023.

Boeing’s missile defense portfolio includes Arrow 3, offering regional missile defense capabilities to effectively respond to short and medium-range ballistic missiles. BA boasts a long-term earnings growth rate of 4% and anticipates a sales improvement of 15.8% in 2023 from the previous year.

Price Movement and Industry Rank

Lockheed’s shares have experienced a 4.6% decline in the past year, compared to the industry’s decline of 9%. The company currently holds a Zacks Rank #3 (Hold).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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