Morgan Stanley has a stark message on Lockheed Martin stock

Morgan Stanley reiterated its Equalweight standing and $675 terms people connected Lockheed Martin (LMT) pursuing the company's announcement of a caller model statement with the Department of War to quadruple accumulation of the Precision Strike Missile.

LMT shares were trading astatine $621.73 astatine the clip of the note, up 27% implicit the past six months. The $675 people implies astir 8.5% upside from that level. Morgan Stanley described the woody arsenic accordant with and additive to Lockheed's broader munitions acceleration strategy.

Lockheed Martin and the Department of Defense announced the statement connected March 25. It builds connected a erstwhile $4.94 cardinal declaration awarded by the US Army past twelvemonth and unneurotic the 2 actions volition quadruple PrSM accumulation capacity, from astir 400 to 1,600 units per year.

The statement besides establishes the imaginable to negociate a multi-year declaration of up to 7 years, taxable to legislature authorization. That operation gives Lockheed and its subcontractors the semipermanent request awesome needed to put successful mill enlargement and automation.

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"Lockheed Martin delivers the precocious precision fires capabilities the warfighter needs, including the Precision Strike Missile, which expands deep-strike capability," said Lockheed Martin Chairman, President and CEO Jim Taiclet. "We are moving intimately with the Department of War and the U.S. Army to physique the Arsenal of Freedom."

Michael Duffey, undersecretary of defence for acquisition and sustainment, added: "By empowering manufacture to put successful the mill floor, we are gathering a decisive and enduring vantage for our warfighters to outpace immoderate imaginable adversary."

Morgan Stanley noted that the PrSM woody is portion of a broader signifier of multi-year agreements betwixt the Pentagon and Lockheed that are shifting the backing situation for the company's rocket programs.

The steadfast had antecedently noted akin deals: a abstracted model to triple PAC-3 MSE interceptor accumulation and different to quadruple THAAD interceptor accumulation capacity. Together, Morgan Stanley said these agreements awesome "structurally higher" Department of War request for rocket systems portion improving outyear backing and accumulation visibility.

The slope sees 2 circumstantial benefits for Lockheed from this environment. First, greater backing certainty allows the institution to put successful facilities, proviso chains, and workforce without the hazard of abrupt fund cuts. Second, higher accumulation rates make the imaginable for borderline enlargement arsenic fixed costs are dispersed crossed greater volumes.