Lockheed Martin Corporation’s LMT business unit, Rotary and Mission Systems, has been awarded a modification contract of $579 million to support the Japan government’s Aegis System Equipped Vessel (ASEV) construction. The latest modification has brought the total value of the contract to $1.54 billion.
Per the terms of the deal, Lockheed Martin will develop, test and integrate equipment, material, software and hardware end items for the ASEV and deliver the system to Japan.
The work will be carried out in Moorestown, NJ, and is expected to conclude by Aug. 31, 2026. The award has been provided by the Missile Defense Agency, Dahlgren, VA.
Lockheed Martin is well-known for its work on the Aegis Combat System, a highly advanced multi-mission defense system against missiles, used by the U.S. Navy and six international allies, including Japan. This system combines radar, weapons and data technology to quickly detect, track and respond to threats. It is an automated command-and-control and weapons platform that handles everything from detection to neutralization.
With growing missile threats from North Korea, Japan has been focusing on strengthening its maritime defenses. The ASEV, a state-of-the-art missile defense warship, is a key part of this effort. Equipped with the Aegis Combat System and Lockheed Martin’s SPY-7 radar, these ships are designed to tackle even the most challenging missile threats, providing robust defense against evolving dangers. Lockheed Martin’s thorough testing process ensures the system is fully integrated and calibrated before delivery, thereby minimizing risk and maximizing performance.
As the Japanese government progresses toward manufacturing its ASEVs, Lockheed Martin, which is one of the primary contributors to this program, has been securing notable contracts like the latest one.
Rising military conflicts, terrorism and border disputes have driven nations across the globe to focus more on national security, particularly in enhancing their naval capabilities, backed by the growing demand to modernize their naval fleet and replace aging vessels with next-generation technologies as well as the rising complexity of warfares.
This is likely to have prompted Mordor Intelligence to forecast a compound annual growth rate of 6.5% for the global naval vessels market during the 2024-2029 time period.
This is likely to benefit Lockheed Martin as it specializes in providing advanced naval defense systems, including the Aegis Combat System and SPY-7 radar. These technologies are critical for modern naval vessels. In addition to these, LMT manufactures lethal warships like the Freedom-Variant Littoral combat ships, which play a crucial role in defending the U.S. maritime borders.
Other defense companies that are likely to enjoy the perks of the expanding naval vessels market have been discussed below.
BAE Systems BAESY: It designs, manufactures and supports complex surface ships, submarines, torpedoes, radars and command and combat systems. It also provides ship repair, maintenance and upgrade services for warships and is a supplier of naval gun systems.
BAESY boasts a long-term (three to five years) earnings growth rate of 12.4%. The Zacks Consensus Estimate for BAESY’s 2024 sales indicates year-over-year growth of 37.7%.
Northrop Grumman Corporation NOC: It supplies advanced defense systems, including navigation, control and combat systems, for naval vessels. NOC is the premier provider of missile launch systems for naval surface ships.
The company’s long-term earnings growth rate is 19.1%. The Zacks Consensus Estimate for NOC’s 2024 sales indicates year-over-year growth of 5.3%.
Huntington Ingalls Industries HII: Its business segment, Ingalls Shipbuilding, designs and constructs non-nuclear ships for the U.S. Navy and the U.S. Coast Guard, including amphibious assault ships, expeditionary warfare ships, surface combatants and national security cutters.
Huntington’s long-term earnings growth rate is 7.4%. The Zacks Consensus Estimate for HII’s 2024 sales indicates year-over-year growth of 1.1%.
Shares of LMT have gained 6.4% in the past six months against the industry’s 1% decline.
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LMT currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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