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Raytheon Gets Missile Contracts

Zacks Equity Research

Raytheon Company (RTN) was awarded two missile contracts by the Department of Defense (DoD). The total value of the agreement is $70.5 million.

The lion’s share of these contracts, worth $49.9 million, comprises of the modification of the existing contract that allows Raytheon to perform engineering work on Standard Missile-3 Block IB (“SM-3IB”).

SM-3IB is the newest version of Raytheon’s Standard surface-to-air missile. It seeks to improve upon the efficiency of the original missile with the employment of short bursts of precision propulsion to steer the missile toward incoming targets. The new SM-3IB also has an improved, two-color infrared seeker. The company expects SM-3IB to be in service in 2015 and finish work by Dec 31, 2013.

The other deal for Raytheon has a contract value of $20.6 million and is the modification of the earlier agreement that was awarded by DoD to secure tube-launched, optically tracked, wireless-guided missiles. To date, considering the latest modification contract, Raytheon’s total contract value associated with this particular missile comes to $203 million.

Waltham, Mass.-based Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. Its Missile Systems division registered a 4.2% year-over-year increase in revenue in the fourth quarter of 2012. The upside was mainly attributable to higher sales on the Standard Missile-3 (SM-3) and Rolling Airframe Missile (HK) programs.

In spite of the declining trend in U.S. defense spending, Raytheon is one of the better-positioned companies among the large-cap defense players due to its non-platform-centric focus. The company enjoys impressive order bookings and order backlog, an improving balance sheet, growing cash flow and operational enhancements.

Recently, the company has realigned its segments to streamline operations, increase productivity and achieve stronger alignment with customers’ preferences. In response to a challenging defense and aerospace market environment, Raytheon’s new structure is expected to improve efficiency with more focus on worldwide customers.

Raytheon presently retains a short-term Zacks Rank #3 (Hold). Other stocks that look promising and are worth accumulating now include Zacks Ranked #1 (Strong Buy) FLIR Systems, Inc. (FLIR), and Zacks Rank #2 (Buy) stocks Astronics Corporation (ATRO) and Alliant Techsystems Inc. (ATK).

Read the Full Research Report on FLIR

Read the Full Research Report on RTN

Read the Full Research Report on ATRO

Read the Full Research Report on ATK

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