Raytheon Wins Naval-Air Contract

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Raytheon Company (RTN) has entered into an agreement with the U.S. Naval Air Systems Command. Per the contract, the company will manufacture an integrated multi-intelligence (Multi-INT) system to protect the warfighters positioned at the forefront. Raytheon’s Intelligence, Information and Services business will be responsible for this program.

Specifically, this Persistent Surveillance System Cross Domain Solution (PSS CDS) will provide the armed forces a detailed position of imminent threats from classified as well as unclassified sources.

The PSS CDS is a software package compact enough to be installed on aircrafts. This software transmits high-definition surveillance videos, sensor data, and traditional as well as non-traditional intelligence, surveillance and reconnaissance (ISR) images to the armies, forewarning them of upcoming threats. In addition, PSS CDS provides protection to the forces in terms of collecting intelligence by utilizing sensors on aerostats, towers and unmanned aerial vehicles.

Raytheon is flooded with a number of contracts from several government establishments. The company has a total backlog of $33.5 billion at the end of first-quarter 2013. Recently, Raytheon won a contract, worth $126 million, from the Department of Defense for the procurement of material needed to manufacture up to 29 Standard Missile-3 Block IB missiles. Also, Raytheon received a sizeable $534.8 million firm-fixed-price contract for the production of Advanced Medium-Range Air-to-Air Missiles for the U.S. Air Force and the militaries of Oman and Saudi Arabia.

The defense operators’ performance primarily depends on the orders coming from the national and international defense establishments. With the risk of U.S. defense budget-cuts appearing large, we believe the defense companies’ attempt toward wining foreign contracts will enable them to offset the decline in domestic orders.

Raytheon currently has a Zacks Rank #3 (Hold). Other stocks from the sector that are presently performing well include The Boeing Company (BA), Northrop Grumman Corporation (NOC) and Alliant Techsystems Inc. (ATK). All these stocks carry a Zacks Rank #2 (Buy).

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