Lockheed Martin Advances Its UAV Portfolio With Chandler/May Acquisition

by Trefis Team
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Unmanned aerial vehicles (UAVs) are an area of increasing interest for many countries around the world, including the U.S. These vehicles offer reconnaissance, surveillance and precision attack capabilities without risking the lives of their operators. Lockheed Martin (NYSE:LMT), which is the largest defense contractor for the U.S. government, is currently not among the leading suppliers of unmanned aircraft systems (UAS) to the U.S. government. General Atomics’ Predator and Reaper drones,  AAI’s Pioneer and Shadow drones, Northrop Grumman’s Global Hawk drones, among others, are currently the leading UAVs deployed by the U.S. government.

However, Lockheed Martin has taken a significant step in developing its unmanned systems technology with the acquisition of Chandler/May, Inc. [1] The acquisition provides Lockheed with advanced technology in UAS which is witnessing increased spending both in military applications as well as civil and commercial use. This acquisition and the further development of the acquired technology will add to growth in Lockheed’s earnings in the coming years.

We currently have a stock price estimate of $93.21 for the company, approximately 5% above its current market price.

See our complete analysis of Lockheed Martin here

Chandler/May Inc.’s capabilities in UAS

Chandler/May specializes in design, development and support of UAS. A UAS consists of one or more UAVs, a ground control station, satellite connectivity, on-board weapons and a few other systems. The company has so far delivered several hundred portable ground control stations to the U.S. Army and is also a supplier to Lockheed for its Desert Hawk UAV program.

Lockheed’s current portfolio of unmanned aircrafts

At present, Lockheed’s unmanned systems portfolio is led by Desert Hawk III, a small UAV designed primarily for surveillance purposes. It has been used by the British Army as a tactical surveillance system and has been deployed for use in Afghanistan. Apart from this, the company has K-MAX, an unmanned helicopter for battlefield cargo resupply; High Altitude Airship, which is designed for persistent surveillance purposes; and a few other systems in its unmanned systems portfolio.

The Chandler/May acquisition provides Lockheed with other critical components of UAS like portable ground control stations and advanced technology to further develop its UAV product portfolio.

Increasing applications for UAVs

In addition to military applications, UAVs are being used in many civil and commercial applications such as search and rescue missions, remote sensing, mineral exploration through geomagnetic aerial surveys of large tracts of land, and commercial aerial surveillance. Commercial aerial surveillance applications include livestock monitoring, pipeline security, wildfire mapping, anti-piracy operations, among others.

Currently when defense spending cuts of the U.S. government have posed an enormous challenge to Lockheed’s growth, the further development of this acquired UAV technology for non-military applications can help the company partially offset the impact from lower defense spending in the future.

All in all, the advanced UAS technology will help Lockheed to tap a larger share of increasing spending both in military and civil spheres.

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Notes:
  1. Lockheed Martin Acquires Chandler/May, Inc., November 13 2012, www.lockheedmartin.com []
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