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Raytheon (RTN) Wins Billion-Dollar Homeland Security Deal

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Raytheon Company RTN has been selected by the U.S. Department of Homeland Security (“DHS”) to provide full lifecycle development and sustainment support. The company will act as the prime contractor and system integrator for the agency’s Network Security Deployment (“NSD”) unit.

This is a single-award, indefinite delivery/indefinite quantity (“IDIQ”) contract that has a potential value of $1 billion. It will run through a term of five years, with the option to extend some for another two years.

NSD is responsible for the National Cybersecurity Protection System ("NCPS"), which provides infrastructure to help over 100 federal civilian government agencies protect their networks against advanced cyber threats.

In recent years, Raytheon has invested more than $3.5 billion to expand its cybersecurity capabilities. The company aims to provide best-in-class security solutions to the DHS to counter rising cyber threats. According to the company, cybersecurity incidents have escalated an average 66% on a yearly basis between 2009 and 2014 globally.

The federal agencies and the DHS intend to leverage the company’s extensive cyber capabilities as well as its 30 years of experience working with defense, intelligence and commercial customers. Per the contract, the company will provide design, development and operations/maintenance services for the NCPS.

In a bid to counter the ongoing sequestration in the U.S. defense spending, Raytheon has been investing heavily in technological upgrades. The company has been acquiring surveillance and cybersecurity companies hoping to boost its intelligence business and leverage the commercial prospects of cyber. With the U.S. fiscal 2016 budget proposal emphasizing cyber programs, cyber-oriented work is expected to yield solid growth in the coming years.

Apart from focusing on cybersecurity capabilities, Raytheon is working hard on bagging orders in various fields from the U.S. government. Yesterday, the company won an IDIQ contract from the Defense Logistics Agency Land and Maritime for providing repairable and consumable spare parts at depot level. The contract has a three-year base period with the option of extending for an additional three years. Contract work will be performed in Massachusetts and is expected to be over by Sep 27, 2021.

Zacks Rank

Raytheon Company currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include LMI Aerospace Inc. LMIA, sporting a Zacks Rank #1 (Strong Buy), and Spirit AeroSystems Holdings, Inc. SPR and BAE Systems plc BAESY, both carrying a Zacks Rank #2 (Buy).

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