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Lockheed Martin (LMT) Wins $100M Deal for A-RCI Systems
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Lockheed Martin Corp.’s (LMT - Free Report) Rotary and Mission Systems business segment recently clinched a modification contract for procurement of Technical Insertion-16 Acoustic-Rapid-Commercial-Off-The-Shelf Insertion (A-RCI) systems, spares and pre-cable kits. Majority of the work related to this deal will be carried out in Manassas, VA.
Valued at $100.4 million, this contract was awarded by the Naval Sea Systems Command, Washington, D.C. and is scheduled to be over by Dec 2022. Lockheed Martin will utilize fiscal 2017 shipbuilding conversion, fiscal 2017 and 2016 other procurement, and fiscal 2017 operations and maintenance funding to complete this deal.
A Brief Note on A-RCI Systems
A-RCI is an open-architecture sonar system that uses legacy sensors and replaces central processors with commercial off-the-shelf (COTS) computer technology and software, within submarines. This system helps the U.S. Navy in searching, detecting and tracking submarine and surface vessels in open-ocean and littoral sea environments without being counter-detected. It also facilitates in covertly executing Naval Special Warfare missions as well as performing under-ice operations.
In the 1990s, Lockheed Martin unveiled A-RCI Systems which allowed frequent hardware and software upgrades, was highly effective and offered improved acoustic quieting measures at a far lower cost than previously possible. Notably, the A-RCI Technical Insertion 16 program provides significant improvement in acoustic performance by upgrading ship sensor processing.
Our View
With the rapid rise in terrorist attacks over the last decade, the U.S. Navy’s focus has shifted to littoral waters, the shallow areas near coastlines, where it must patrol and defend against small subs, underwater mines, and fast attack boats. Considering this, the need for timely detection and localization of quiet subs in the especially noisy shallow-water sonar field has made the ARCI submarine sonar system all the more critical. Constant upgrades of the system have made it more valuable for the nation’s naval base and an attractive choice of defense equipment for the U.S. allied countries.
As geopolitical uncertainty continues to prevail across the globe, we expect renowned defense contractors like Lockheed Martin to win more such deals in the days to come. A quick sneak peek into the company’s recently released fourth-quarter earnings numbers also reflects this. In particular, Lockheed Martin’s RMS segment witnessed a solid 37% improvement in sales and 45% rise in operating profit.
Going forward, we expect Lockheed Martin to carry on with this trend of outperformance in the upcoming quarters as well. Moreover, the company’s anticipation to generate more than $5.7 billion in cash from operations during 2017, as against $5.2 billion at 2016-end, buoys optimism.
However, year to date, Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry, with the company’s gain of 7.1% being lower than the industry’s addition of 10.3%. This might have been triggered by intense competition from some of the largest defense primes in the U.S.; particularly The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have come down by 3 cents over the past 60 days, which reflects investors’ reluctance to consider the stock as a suitable investment option.
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Lockheed Martin (LMT) Wins $100M Deal for A-RCI Systems
Lockheed Martin Corp.’s (LMT - Free Report) Rotary and Mission Systems business segment recently clinched a modification contract for procurement of Technical Insertion-16 Acoustic-Rapid-Commercial-Off-The-Shelf Insertion (A-RCI) systems, spares and pre-cable kits. Majority of the work related to this deal will be carried out in Manassas, VA.
Valued at $100.4 million, this contract was awarded by the Naval Sea Systems Command, Washington, D.C. and is scheduled to be over by Dec 2022. Lockheed Martin will utilize fiscal 2017 shipbuilding conversion, fiscal 2017 and 2016 other procurement, and fiscal 2017 operations and maintenance funding to complete this deal.
A Brief Note on A-RCI Systems
A-RCI is an open-architecture sonar system that uses legacy sensors and replaces central processors with commercial off-the-shelf (COTS) computer technology and software, within submarines. This system helps the U.S. Navy in searching, detecting and tracking submarine and surface vessels in open-ocean and littoral sea environments without being counter-detected. It also facilitates in covertly executing Naval Special Warfare missions as well as performing under-ice operations.
In the 1990s, Lockheed Martin unveiled A-RCI Systems which allowed frequent hardware and software upgrades, was highly effective and offered improved acoustic quieting measures at a far lower cost than previously possible. Notably, the A-RCI Technical Insertion 16 program provides significant improvement in acoustic performance by upgrading ship sensor processing.
Our View
With the rapid rise in terrorist attacks over the last decade, the U.S. Navy’s focus has shifted to littoral waters, the shallow areas near coastlines, where it must patrol and defend against small subs, underwater mines, and fast attack boats. Considering this, the need for timely detection and localization of quiet subs in the especially noisy shallow-water sonar field has made the ARCI submarine sonar system all the more critical. Constant upgrades of the system have made it more valuable for the nation’s naval base and an attractive choice of defense equipment for the U.S. allied countries.
As geopolitical uncertainty continues to prevail across the globe, we expect renowned defense contractors like Lockheed Martin to win more such deals in the days to come. A quick sneak peek into the company’s recently released fourth-quarter earnings numbers also reflects this. In particular, Lockheed Martin’s RMS segment witnessed a solid 37% improvement in sales and 45% rise in operating profit.
Going forward, we expect Lockheed Martin to carry on with this trend of outperformance in the upcoming quarters as well. Moreover, the company’s anticipation to generate more than $5.7 billion in cash from operations during 2017, as against $5.2 billion at 2016-end, buoys optimism.
However, year to date, Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry, with the company’s gain of 7.1% being lower than the industry’s addition of 10.3%. This might have been triggered by intense competition from some of the largest defense primes in the U.S.; particularly The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have come down by 3 cents over the past 60 days, which reflects investors’ reluctance to consider the stock as a suitable investment option.
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.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>