U.S. defense goliath Lockheed Martin Corporation (LMT) got a follow-on contract worth $260 million from the U.S. Army to produce the combat-proven Modernized Target Acquisition Designation Sight/Pilot Night Vision Sensor (M-TADS/PNVS) systems, also known as Arrowhead, used in Apache attack helicopters.

The contract will also require the production of Arrowhead kits and spares. Under the contract, which extends through April 2013, Lockheed will deliver more than 1,000 systems to the U.S. Army and several allied countries.

The Arrowhead kit modernizes the U.S. Army’s Apache helicopters by upgrading the infrared sensors and associated electronics. Arrowhead provides Apache pilots the most advanced long-range, electro-optical precision engagement and pilotage capabilities, ensuring safe flight during day, night and adverse-weather missions.

The U.S. Army explains that there is great demand for the Arrowhead-equipped LONGBOW Apache to support current operations. The LONGBOW Apache ensures that the ground forces remain safe and decisive in combat.

Lockheed Martin had produced the first Arrowhead system for the U.S. Army in May 2005, and completed integration on the first Apache helicopters in June 2005.

Lockheed Martin Corporation, based in Bethesda, Maryland, is a diversified defense company that primarily researches, designs, develops, manufactures, integrates, operates, and sustains technology systems and products, apart from providing a range of management, engineering, technical, scientific, logistic and information services. 

The company’s customer base includes the U.S. government, foreign governments and other commercial buyers, with the U.S. government accounting for a major part of its business. The company thus continues to benefit from defense outlays and contract wins. Continued contract wins for the company will help it post solid revenue growth going forward.

Lockheed’s revenue in the second quarter of 2010 increased 3.3% year over year to $11.4 billion. For fiscal 2010, the company guided revenue in the $45.5 billion – $46.5 billion range and earnings of $7.15 – $7.35 per share. The Zacks Consensus Estimates for 2010 and 2011 are $7.41 and $7.72, respectively.

Though the company will continue to grow from large contract awards in the future, we expect results to be hurt by the proposed $100 billion reduction in the U.S. government’s defense budget over the next five years. Thus, we remain on the sidelines, maintaining our Neutral recommendation on Lockheed shares. Lockheed currently retains a Zacks #3 Rank (short-term ‘Hold’ rating).

 
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