Raytheon Company (RTN) has received a contract to deliver a Command, Control, Communications, Computers and Intelligence (“C4I”) system to the Kingdom of Saudi Arabia. The contract, received by Raytheon's Network Centric Systems business and valued in excess of $600 million, was awarded as a direct commercial sale by the Saudi Ministry of Defense (“MOD”).
Raytheon has in the past provided many of Saudi’s defense systems, and has a significant presence in-country. The company has a long-standing relationship with the Kingdom of Saudi Arabia, beginning more than 45 years ago with their purchase and fielding of Hawk, Raytheon’s combat-proven, medium-range air defense system.
Earlier, in June 2011, Raytheon received a $1.7 billion contract to upgrade Saudi Arabia’s Patriot Air and Missile Defense System. The award included ground-system hardware, a full training package and support equipment upgrades.
Based in Waltham, Massachusetts, Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. The company provides high-tech electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services.
Raytheon is one of the best-positioned companies among the large-cap defense players due to its non-platform-centric focus, as well as its strong order bookings and order backlog of approximately $35 billion at the end of the first nine months of 2012.
Raytheon plays an important role in missile defense and is ideally positioned to help the United States and its allies achieve current and future missile defense goals. Given the declining trend in the U.S. defense spending, the company is one of the best-positioned companies among the large-cap defense players.
Revenue and earnings growth continue to be driven by a strong presence in the areas of Intelligence, Surveillance and Reconnaissance (“ISR”); air & missile defense systems; border security; air traffic management; training and homeland security; and cyber security. Also, its non-platform centric focus insulates it from cancellation or deferral of specific platform programs.
Looking forward, the company enjoys strong order bookings and order backlog, an improving balance sheet, and growing cash flow, besides operational improvements. Future growth will be driven by its focus on ISR unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD.
However, these positives are offset by apprehensions over the future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations. Thus, over the longer run, we maintain our long-term Neutral recommendation on the stock. The company presently retains a short-term Zacks #3 Rank (Hold). The company mainly competes with L-3 Communications Holdings Inc. (LLL) and FLIR Systems Inc. (FLIR).
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