Lockheed Martin Corporation (LMT) has received a contract from the Missile Defense Agency (“MDA”) worth $150 million for the production of Terminal High Altitude Area Defense (“THAAD”) Weapon System launchers and fire control and communications equipment for the U.S. Army.
Per the contract, the company will produce 12 launchers, two fire control and communications units, and associated support equipment for the THAAD batteries. Out of 12 launchers, six launchers will be allotted to THAAD Battery 5 and the rest six launchers will be divided between Batteries 1 and 2 equally.
As per the contract, Ground hardware will be supplied at Fort Bliss, Texas. Post production, the equipment will be assembled and tested at Lockheed’s manufacturing facility in Camden, Arkansas. Delivery of the equipment for Battery 5 will be completed by 2015.
Lockheed had received production contract for the first two batteries in late 2006. At Fort Bliss, Texas, the first THAAD Battery (A-4 ADA Battery) was activated in May 2008 and the second THAAD Battery (A-2 ADA Battery) was activated in October 2009.
In March 2011, the company had received a contract worth $789.8 million to produce the THAAD Weapon System for MDA. Per the contract, the company had to produce 48 THAAD interceptors, six THAAD launchers, four fire control units and additional support equipment for Batteries 3 and 4. The delivery of these components is expected to be completed in 2013.
Apart from domestic supply, the company has also been involved in Foreign Military Sale (“FMS”) with THAAD weapon system. In December 2011, the company received a contract worth $1.96 billion to produce THAAD Weapon System for the MDA as well as the United Arab Emirates.
Terminal High Altitude Area Defense system is used to shoot down short, medium, and intermediate ballistic missiles in their terminal phase using a hit-to-kill approach. It is the only missile defense system with the operational flexibility to intercept in both within and outside Earth’s atmospheres for providing versatile capability to the warfighter.
Coming back to Lockheed Martin, the largest defense contractor in the world, whose customer base includes the U.S. government, foreign governments, and other commercial buyers. The company provides sustainment and logistic services in support of fire control and tactical missile programs. THAAD is one of the company’s core programs.
Besides THAAD, we expect the company to benefit from a strong defense focus on a number of its platform programs, such as the C-130 Hercules & C-5 Galaxy transport aircrafts, F-16 Fighting Falcon multi-role jet, MH-60 Helicopters, the Advanced Extremely High Frequency and the Global Positioning Satellite III system satellites, the Littoral Combat Ship, the Aegis Weapons System for mobile and sea-based missile defense.
Recently, Lockheed posted second-quarter 2012 continuing earnings of $2.38 per share, beating the Zacks Consensus Estimate of $1.92. On the revenue front, the company reported quarterly net sales of $11.9 billion, beating the Zacks Consensus Estimate of $11.3 billion by $616 million. Also, the company superseded the year-ago quarterly revenue of $11.5 billion by $378 million.
The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Outperform recommendation on the stock.
The company mainly competes with General Dynamics Corporation (GD) and Northrop Grumman Corporation (NOC).
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