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Raytheon to Provide Engineering Services to F-16 Display Unit

Zacks Equity Research

Raytheon Company RTN recently secured a $70.4-million contract for providing engineering services, organic depot stand-up and production support to the F-16 Center Display Unit. The contract was awarded by the Air Force Life Cycle Management Center, F-16 Contracting Branch, Hill Air Force Base, UT.

Work related to this deal will be performed in Indianapolis, IN, and is expected to get completed by Feb 28, 2025.

A Brief Note on F-16

The F-16 Fighting Falcon, developed by General Dynamics GD, is a compact, multi-role fighter aircraft, which is highly maneuverable and lethal in air-to-air combat and air-to-surface attack. It provides a relatively low-cost, high-performance weapon system for the United States and allied nations.

Our View

With rapid technological upgrade, identifying threats beforehand has become increasingly crucial, and sensors play a critical role in that. To this end, being a prime defense contractor in the United States, Raytheon’s sensor systems hold a significant share of the U.S. sensor systems market. The latest contract win is an example of its growing market share within the country.

Such contract flows tend to boost the company’s Space and Airborne Systems (SAS) unit, which develops integrated aircraft communication and
sensor systems. Evidently, this segment registered annual sales growth of 13% in the fourth quarter of 2018. Considering the latest contract win, we can expect this unit to register similar top-line growth in the coming quarters as well.

Furthermore, recently the U.S. government proposed its fiscal 2020 defense budget that includes a spending plan of $57.7 billion on aircraft, reflecting a massive increase of 166% from the approved spending for fiscal 2019. If approved, such spending provision should usher in more contracts for Raytheon, going ahead.

Price Performance

Shares of Raytheon have plunged about 16.4% in a year against the industry’s growth of 7.3%.



Zacks Rank & Key Picks    

Raytheon currently carries Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Spirit Aerosystems Holdings SPR and AeroVironment, Inc. AVAV.

While Spirit Aerosystems sports a Zacks Rank #1 (Strong Buy), AeroVironment carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Spirit Aerosystems’ long-term growth estimates currently stand at 7.8%. The Zacks Consensus Estimate for 2019 earnings has risen 3.7% to
$7.56 in the past 90 days.

AeroVironment’ long-term growth estimates currently stand at 25%. The Zacks Consensus Estimate for 2019 earnings has increased 16.67% to
$1.75 in the past 90 days.

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General Dynamics Corporation (GD) : Free Stock Analysis Report
 
AeroVironment, Inc. (AVAV) : Free Stock Analysis Report
 
Spirit Aerosystems Holdings, Inc. (SPR) : Free Stock Analysis Report
 
Raytheon Company (RTN) : Free Stock Analysis Report
 
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