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Raytheon Wins Deal to Offer Retrofits for F-15 Fleet of Jets

Zacks Equity Research

Raytheon Company RTN recently secured a $21.2-million contract for retrofitting the F-15 fleets’ current Identify Friend of Foe units. The deal was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

Notably, the aforementioned units offer Mode 5 capability for the APX-114 and APX-119 on the F-15 models C/D/E via a hardware retrofit and software upgrade. Per the terms of the deal, these units will provide National Security Agency approved cryptography and robust anti-jam interrogation and reply encryption capabilities.

Work related to the deal will be executed in Aberdeen Proving Grounds, MD; and Largo, FL. The entire task is expected to be completed by August 2022.

A Brief Note on F-15

Boeing’s BA F-15 Strike Eagle is a twin-engine, all-weather tactical fighter aircraft. Its proven design is unbeatable in air-to-air combat, with more than 100 aerial combat victories.

What Favors Raytheon?

Against the backdrop of increasing geopolitical uncertainties around the world, many developing countries like India have significantly expanded their defense spending. Developed nations already account for a significant share of global defense expenses. This, in turn, has bolstered demand for weaponries. With the United States being the largest weapon exporter, the country’s defense contractors enjoy a dominant position in the defense space. Raytheon is one such contractor. It witnesses frequent flow of contracts from Pentagon as well as foreign allies of the United States for its various products.

Such contracts boost the company’s Space and Airborne Systems (SAS) unit, which develops integrated sensors, retrofit components and aircraft communication systems. Evidently, this segment registered solid sales growth of 13% year over year in the fourth quarter of 2018.

The U.S. fiscal 2019 defense budget provisions major war fighting investments worth $21.7 billion for aircraft. Such budgetary developments should benefit Raytheon’s SAS unit with more contracts related to aircraft retrofit components flowing in.These contracts willbolster the company’s overall profit margin.

Price Movement

Raytheon’s stock has lost 12.8% in the past 12 months against the industry’s rally of 5.7%.

Zacks Rank & Key Picks    

Raytheon currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Spirit Aerosystems Holdings SPR and Heico Corporation HEI.

While Spirit Aerosystems sports a Zacks Rank #1 (Strong Buy), Heico 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 is estimated to be 7.8%. The Zacks Consensus Estimate for 2019 earnings has risen 3.7% to $7.56 in the past 90 days.

Heico’s long-term growth is projected to be 12.1%. The Zacks Consensus Estimate for 2019 earnings has risen 7% to $2.14 in the past 90 days.

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The Boeing Company (BA) : Free Stock Analysis Report
 
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Raytheon Company (RTN) : Free Stock Analysis Report
 
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