Lockheed Martin’s (LMT) Unit Wins $102M Deal From U.S. Navy

Shutterstock photo Lockheed Martin Corp. ‘s LMT business segment, Rotary and Missions Systems (RMS) has won a modification contract for exercising options to procure technical insertion (TI)-16 Acoustic Rapid Commercial Off-the-Shelf Insertion (A-RCI) systems, pre-cable kits and A-RCI sonar engineering services.

Contract Details

Valued at $102 million, this contract has been awarded by the Naval Sea Systems Command, Washington Navy Yard, Washington, DC.

The majority of the work will be carried out in Manassas, VA, while the rest will be executed in Clearwater, FL. The deal is expected to be complete by December 2018.

Lockheed Martin will utilize fiscal 2018 shipbuilding and conversion (Navy), fiscal 2018 research and development test and evaluation, and fiscal 2018 other procurement (Navy) funds to complete the work.

A Brief Note on A-RCI Systems

A-RCI is an open-architecture sonar system that uses legacy sensors. It also 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 submarines and surface vessels in open-ocean and littoral sea environments without being counter-detected. It facilitates covert execution of Naval Special Warfare missions and under-ice operations as well.

In the 1990s, Lockheed Martin unveiled A-RCI Systems, which allowed frequent hardware and software upgrades. The system was highly effective and offered improved acoustic quieting measures at a far lower cost than previously possible. Notably, the A-RCI TI 18-20 engineering services provide engineering development to support modernization requirements.

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. These are the areas that 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 very much critical. Additionally, 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 peek into the company’s third-quarter earnings numbers also reflects this. In particular, the RMS segment generated revenues of $3.4 billion in the third quarter, reflecting 27.9% of the company’s total revenues.

Moreover, the company’s improved cash outlook for 2017 reflects enhanced cash performance at the Rotary and Mission Systems division. That said, the aforementioned contract gain has the potential to boost revenues at this segment.

Furthermore, the fiscal 2018 defense policy has authorized the United States to spend $700 billion on defense. This has further enhanced the prospect of increased order flow from Pentagon for major defense contractors like Lockheed Martin, Raytheon Company RTN , Northrop Grumman Corporation NOC , The Boeing Company BA and others. Price Movement Lockheed Martin’s stock was up about 19.8% in a year compared with the broader industry […]