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Lockheed (LMT) Clinches a $4.5B Contract for PAC-3 MSE Missiles
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Per major news sources, Lockheed Martin Corp. (LMT - Free Report) recently secured a multi-year contract worth $4.5 billion for its Phased Array Tracking to Intercept of Target Advanced Capability-3 missile from the U.S. Army. Per the terms of the deal, Lockheed will procure 870 Patriot Advanced Capability-3 (PAC-3) Missile Segment Enhancement (“MSE”) missiles and associated hardware.
What’s Favoring Lockheed?
Global geopolitical and socioeconomic unrest has led both developed and emerging nations to increase the size of their armaments, with missiles making up a large share of these arsenals. Consequently, leading missile manufacturers such as Lockheed are witnessing a solid contract flow for their combat-proven missiles and associated hardware. The latest contract win is evidence of it.
Specifically, Lockheed's Missiles and Fire Control division develops cutting-edge combat missiles for the U.S. Army, Navy, Air Force, Marine Corps, NASA and several international allies of the United States. LMT’s PAC-3 is a missile that is highly sophisticated and can protect against advanced threats, such as airplanes, cruise missiles, hypersonic missiles and tactical ballistic missiles.
In light of this, it is essential to note that 15 partner nations of the United States are currently using the PAC-3 family of missiles, with Lockheed having manufactured 17,000 PAC-3 MSEs so far. This undoubtedly illustrates the strong demand PAC-3 enjoys in the global missile industry.
Growth Prospects
With the ongoing hostilities in various regions of the Middle East and the Russia-Ukraine war, which has been going on for more than two years, the global peace index indicates an unstable environment. As a result, the demand for military weapons — especially missiles — has increased in the defense industry as countries attempt to defend their borders from previously unheard-of attacks.
Consequently, the Mordor Intelligence firm projects the global missiles and missiles defense system market to witness a CAGR of 5% over the 2024-2029 period. Such growth opportunities offered by the aforementioned market should bode well for Lockheed, which is a prominent missile manufacturer.
A PAC-3 MSE interceptor was launched by Lockheed in May 2024 from an MK-70 containerized launch vehicle to intercept a cruise missile target in flight, a notable move to expand the PAC-3 missile's market reach. With the help of the Virtualized Aegis Weapon System, PAC-3 MSE was deployed in this configuration for the first time to intercept a live target. It is anticipated that these modernization initiatives, along with the rising demand for missiles, will result in further PAC-3 missile contract wins, which will improve LMT's top line.
Peer Prospects
As global threats continue to rise, apart from LMT, defense contractors that are likely to benefit from the growth opportunities offered by the missiles and missile defense system market are as follows:
Northrop Grumman (NOC - Free Report) : It creates and manufactures warheads, fuses, sophisticated high-speed propulsion systems and other missile components. The company is one of the top suppliers of solid rocket propulsion for air-launched missiles, interceptors, submarine-launched weapons and hypersonic missile systems.
Northrop has a long-term (three to five years) earnings growth rate of 8.7%. The Zacks Consensus Estimate for NOC’s 2024 sales suggests growth of 4.6% from the prior-year reported figure.
RTX Corp (RTX - Free Report) : It offers a variety of combat-proven missile defense systems, including the Patriot missile, Standard Missiles, Advanced Medium-Range Air-to-Air Missiles, Evolved Seasparrow Missiles, the Tomahawk cruise missile and a few more. To keep up with its growing demand for a wide variety of missiles, RTX broke ground with a $115 million worth, 26,000-square-foot expansion of its Redstone Raytheon Missile Integration Facility in April 2024.
RTX boasts a long-term earnings growth rate of 10.6%. The Zacks Consensus Estimate for its 2024 sales implies an improvement of 6.2% from the 2023 reported figure.
The Boeing Company (BA - Free Report) : For almost 25 years, Boeing has been providing the United States, its allies and international partners with air and missile defense systems. The Avenger Air Defense System, Ground-Based Midcourse Defense and a few additional missiles are among its product offerings.
BA boasts a long-term earnings growth rate of 25.5%. The Zacks Consensus Estimate for its 2024 sales suggests an improvement of 0.9% from the 2023 reported figure.
Price Movement
In the past six months, shares of Lockheed have risen 3.1% against the industry’s decline of 10.2%.
Image: Bigstock
Lockheed (LMT) Clinches a $4.5B Contract for PAC-3 MSE Missiles
Per major news sources, Lockheed Martin Corp. (LMT - Free Report) recently secured a multi-year contract worth $4.5 billion for its Phased Array Tracking to Intercept of Target Advanced Capability-3 missile from the U.S. Army. Per the terms of the deal, Lockheed will procure 870 Patriot Advanced Capability-3 (PAC-3) Missile Segment Enhancement (“MSE”) missiles and associated hardware.
What’s Favoring Lockheed?
Global geopolitical and socioeconomic unrest has led both developed and emerging nations to increase the size of their armaments, with missiles making up a large share of these arsenals. Consequently, leading missile manufacturers such as Lockheed are witnessing a solid contract flow for their combat-proven missiles and associated hardware. The latest contract win is evidence of it.
Specifically, Lockheed's Missiles and Fire Control division develops cutting-edge combat missiles for the U.S. Army, Navy, Air Force, Marine Corps, NASA and several international allies of the United States. LMT’s PAC-3 is a missile that is highly sophisticated and can protect against advanced threats, such as airplanes, cruise missiles, hypersonic missiles and tactical ballistic missiles.
In light of this, it is essential to note that 15 partner nations of the United States are currently using the PAC-3 family of missiles, with Lockheed having manufactured 17,000 PAC-3 MSEs so far. This undoubtedly illustrates the strong demand PAC-3 enjoys in the global missile industry.
Growth Prospects
With the ongoing hostilities in various regions of the Middle East and the Russia-Ukraine war, which has been going on for more than two years, the global peace index indicates an unstable environment. As a result, the demand for military weapons — especially missiles — has increased in the defense industry as countries attempt to defend their borders from previously unheard-of attacks.
Consequently, the Mordor Intelligence firm projects the global missiles and missiles defense system market to witness a CAGR of 5% over the 2024-2029 period. Such growth opportunities offered by the aforementioned market should bode well for Lockheed, which is a prominent missile manufacturer.
A PAC-3 MSE interceptor was launched by Lockheed in May 2024 from an MK-70 containerized launch vehicle to intercept a cruise missile target in flight, a notable move to expand the PAC-3 missile's market reach. With the help of the Virtualized Aegis Weapon System, PAC-3 MSE was deployed in this configuration for the first time to intercept a live target. It is anticipated that these modernization initiatives, along with the rising demand for missiles, will result in further PAC-3 missile contract wins, which will improve LMT's top line.
Peer Prospects
As global threats continue to rise, apart from LMT, defense contractors that are likely to benefit from the growth opportunities offered by the missiles and missile defense system market are as follows:
Northrop Grumman (NOC - Free Report) : It creates and manufactures warheads, fuses, sophisticated high-speed propulsion systems and other missile components. The company is one of the top suppliers of solid rocket propulsion for air-launched missiles, interceptors, submarine-launched weapons and hypersonic missile systems.
Northrop has a long-term (three to five years) earnings growth rate of 8.7%. The Zacks Consensus Estimate for NOC’s 2024 sales suggests growth of 4.6% from the prior-year reported figure.
RTX Corp (RTX - Free Report) : It offers a variety of combat-proven missile defense systems, including the Patriot missile, Standard Missiles, Advanced Medium-Range Air-to-Air Missiles, Evolved Seasparrow Missiles, the Tomahawk cruise missile and a few more. To keep up with its growing demand for a wide variety of missiles, RTX broke ground with a $115 million worth, 26,000-square-foot expansion of its Redstone Raytheon Missile Integration Facility in April 2024.
RTX boasts a long-term earnings growth rate of 10.6%. The Zacks Consensus Estimate for its 2024 sales implies an improvement of 6.2% from the 2023 reported figure.
The Boeing Company (BA - Free Report) : For almost 25 years, Boeing has been providing the United States, its allies and international partners with air and missile defense systems. The Avenger Air Defense System, Ground-Based Midcourse Defense and a few additional missiles are among its product offerings.
BA boasts a long-term earnings growth rate of 25.5%. The Zacks Consensus Estimate for its 2024 sales suggests an improvement of 0.9% from the 2023 reported figure.
Price Movement
In the past six months, shares of Lockheed have risen 3.1% against the industry’s decline of 10.2%.
Image Source: Zacks Investment Research
Zacks Rank
Lockheed currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.