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Raytheon Up on Contract Wins

Zacks Equity Research

Shares of the aerospace and defense operator Raytheon Company (RTN) gained 3.2% over the last seven days closing at $89.60 on Dec 24. This can be attributed to a series of contract wins over the same period.

The total value of the contracts received in the past one week exceeded $560 million, which included both domestic and foreign defense contracts. The two latest contract wins, one domestic while the other international, have a combined value of $204.4 million.

The domestic contract worth $134.4 million is for the design and development of Global Aircrew Strategic Network Terminals (:ASNT) Increment I. Raytheon will work on the design and the development phase with work expected to be completed by 2016.

Global ASNT Increment I will be a secure and survivable multi-path communication system. This system will be used to disseminate nuclear command and control messages from the highest levels of government down to lower ranks. In addition, it will also locate and send information to aircrews at geographically dispersed locations.

Secure and prompt delivery of information to the designated receivers is an essential requirement in nuclear command. We believe Raytheon with its existing expertise will be able deliver a system which will make nuclear messages more secure.

The foreign military sales contract is worth $70 million. Per the contract, Raytheon will supply 11 Advanced Countermeasures Electronic Systems and multiple replaceable parts to Egypt, Iraq and the Moroccan government. These electronic gadgets will be utilized to jam anti-aircraft missiles and anti-aircraft radar targeting systems.

Another foreign contract worth $42.5 million was also received during this time frame. The contract was from Royal Australian Navy to manufacture and deliver AN/AQS-22 Airborne Low Frequency Sonar spares.

Foreign defense contracts are helping the U.S. defense majors in a big way as the U.S. defense budget is likely to be trimmed in the face of increasing government austerities.

Raytheon currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include The Boeing Company (BA), Lockheed Martin Corporation (LMT) and General Dynamics (GD). All these stocks hold a Zacks Rank #2 (Buy).

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