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Raytheon Clinches DoD Contract

Zacks Equity Research

The latest defense contracts offered by the U.S. Department of Defense (DoD) were valued at a whopping $7.59 billion. Among the contenders was Raytheon Company (RTN), which clinched a $15.0 million modification contract for Cooperative Engagement Capabilities (CEC) production to the U.S. Navy. The contract is set to run through Oct 2014.

Defense players like General Dynamics Corp. (GD) and Lockheed Martin Corp. (LMT) were the other key contract gainers. This is another feather that Raytheon added to its cap after the $54.0 million modification contract from the U.S. Army on Aug 26.

The contracting activity of the CEC contract is the Naval Sea Systems Command, Washington, D.C. The necessary tasks related to the contract will be executed majorly at Largo, Fla. as well as in Dallas, Texas and St. Petersburg, Fla.

The CEC system is Raytheon’s flagship product, designed to enhance battle force effectiveness by improving overall situational awareness and by supporting longer range, cooperative, multiple, or layered engagement strategies. The system is able to interpret data from remote sources and provides a clear picture of the opposition’s move.

Recently, Lockheed Martin and the U.S. Navy successfully test fired its Aegis Combat System equipped with CEC under the Naval Integrated Fire Control-Counter Air program. The CEC system has been a game changer in shaping the defense landscape by increasing the lifespan of cruisers and destroyers.

Raytheon has been known for introducing high-tech engineering and systems support capabilities to the U.S. defense. The company recently secured a two-year long maritime border security contract from Philippines for constructing and developing a National Coast Watch Center (:NCWC), which will allow data integration from various agencies into the NCWC.

We note that amid the current budget sequestration, Raytheon has received a string of DoD contracts. We believe the company will retain its growth momentum on the back of its technological acumen. This will contribute to consistent international and domestic order flows.

At the moment, Raytheon’s position in the market looks good with a Zacks Rank #2 (Buy). An industry operator also worth mentioning is Zacks Ranked #2 (Buy) Northrop Grumman Corp. (NOC).

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