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Raytheon Company (RTN) Wins $32M Contract from Navy for SM-6

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Raytheon Company RTN announced that it has secured a $32.3 million modification contract from the Naval Sea Systems Command, Washington, DC.

Details of the Contract

Per the contract, the company will procure long-lead material for supporting the U.S. Navy’s fiscal 2017 Standard Missile-6 full-rate production requirements and spares.

About 71% of the work related to the contract will be carried out at the Camden, AR facility of Raytheon, while the rest will be performed at San Diego, CA (9%); Middletown, CT (9%); Amesbury, MA (3%); Andover, MA and Irvine, CA (2% each); Verdi, NV and Needham Heights, MA (1% each); Anaheim, CA (1%); Warrington, PA, and Union, NJ (less than 1% each). The work is expected to be completed by Mar 2020.

About Raytheon’s Standard Missile-6 (SM-6)

The U.S. Navy uses the SM-6 missile on the cruisers and destroyers. These missiles are known to provide Joint Force and Strike Force Commanders fleet air defense against manned and unmanned aircraft, land-attack anti-ship cruise missiles in flights, ballistic missiles in their terminal or final stage of flight over land or sea along with the targets on the ocean’s surface. The SM-6 missiles are considered triple threats as they provide anti-air warfare, sea-based terminal ballistic missile defense as well as anti-surface warfare.

SM-6 missiles by Raytheon possess both offensive and defensive capability by utilizing its Standard Missile airframe and propulsion system. Till date, the company has supplied more than 300 missiles and continues to improve the quality and the precision of the same with advanced research and development.

Why Raytheon?

While cyber-attacks, terrorism threats and enhanced geopolitical instability are one the rise, it is becoming increasingly important for all countries to elevate their level of security and defense. Defense Equipment manufacturers like Raytheon, AeroVironment, Inc. AVAV, Orbital ATK, Inc. OA, Rockwell Collins, Inc. COL are trying to put their best foot forward.

Raytheon is one of the companies among the major large-cap defense players due to its non-platform-centric focus. Moreover, the company has been enjoying a steady stream of contracts from government establishments. Earlier in June, the company announced that its business unit, Missile Systems, has won a contract from the U.S. Navy to procure full-rate production requirements and spares for fiscal 2017 Standard Missile-2 (SM-2). The procurement will be done for the U.S. and Allied Foreign Navies.

Additionally, President Trump’s support toward increasing defense spending and the proposed hike in 2018 defense budget is currently in favor of companies like Raytheon. If the budget hike is approved by the majority, the funds would be utilized in procuring a handful of defense equipment that include tactical missiles and Lockheed’s Terminal High Altitude Area Defense interceptors.

Price Movement

In the last six months, shares of Raytheon have gained 18.5% compared to the industry’s gain of 16.5% in the same period of time.

Foreign military contracts continue to be the vital growth driver for Raytheon. Rising demand from the Gulf countries and Asia-Pacific will also boost revenues.

Zacks Rank

Raytheon currently holds a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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