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Raytheon (RTN) Secures Navy Deal for AIM-9X Missile Program

Zacks Equity Research

Raytheon Company’s RTN business division Missile Systems (MS) recently secured a $12 million modification contract for the procurement of AIM-9X Block II All Up Round tactical missiles of the 18th lot. The deal will serve the U.S. Navy, Air Force and a handful of foreign governments including that of Saudi Arabia, Israel, Poland, Japan, Taiwan, Turkey, Belgium and Malaysia.

Details of the Deal

Per the terms of the deal, the MS business unit will also acquire Captive Air Training missile guidance units, tail caps and containers as well as related spares. Notably, the contract was awarded by Naval Air Systems Command, Patuxent River, MD.

Majority of the work related to the deal will be executed in Tucson, AZ; Andover, MA, Keyser, WV, and Santa Clarita, CA. The entire task is expected to be over by March 2021.

About AIM-9X Missile

The AIM-9X Sidewinder missile is the most advanced infrared-tracking, short-range, air-to-air and surface-to-air missile in the world. It is configured for easy installation in a wide range of modern aircraft including the F-15, F-16, F/A-18, E/A-18G, F-22 and F-35 fighters. Its latest variant, the AIM-9X Block II missile, adds a redesigned fuse and a digital ignition safety device that enhances ground handling and in-flight safety.

What Favors Raytheon?

In recent times, missile defense seems to be playing a pivotal role in a nation’s defense strategy owing to increasing geo-political tensions across the globe. To this end, Raytheon — a prominent U.S. missile maker— has been clinching frequent awards from the United States as well as international customers, courtesy of its high-end, combat-proven missiles.

As a result, the company’s growth prospects are expected to get a boost, considering the technological advancements and services it offers in missile defense. This, in turn, should aid the MS business unit’s revenue growth. Evidently, the MS division recorded a solid year-over-year sales growth of 6% in fourth-quarter 2018. We may expect the latest deal to instill further growth in this segment.

Per the Markets and Markets research firm, the rocket and missile market is projected to see a CAGR of 4.74% from $55.5 billion in 2017 to $70 billion by 2022. This, in turn, should lead to healthy growth prospects, with Raytheon being a prominent missile maker in the United States.

Price Movement

In a year’s time, shares of Raytheon have lost 19.5%, compared to the industry’s 2.9% rise.

Zacks Rank & Key Picks

Raytheon currently carries a Zacks Rank #3 (Hold). A few better-ranked companies in the same sector are Teledyne Technologies Incorporated TDY, AeroVironment, Inc. AVAV and Astronics Corporation ATRO. While Teledyne Technologies sports a Zacks Rank #1 (Strong Buy), AeroVironment and Astronics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Teledyne Technologies came up with average positive earnings surprise of 12.92% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 5.26% to $9.00 over the past 90 days.

AeroVironment delivered average positive earnings surprise of 257.01% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has moved 33.3% up to $1.48 over the past 90 days.

Astronics delivered positive earnings surprise of 5.71% in the last reported quarter. The company has an expected long-term earnings growth rate of 10%.

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