Raytheon Company (RTN) has been awarded a $ 177 million contract modification by the Federal Aviation Administration (FAA) to continue deployment of the Standard Terminal Automation Replacement System, or STARS, under the FAA's terminal automation, modernization and replacement program.
STARS is jointly managed by the FAA and Department of Defense. It is a highly reliable air traffic automation system designed to replace capacity-constrained terminal area air traffic control facilities within the National Airspace System.
The contract includes production and deployment of 11 systems for the FAA's largest terminal radar approach control facilities including: Northern California, Southern California, Dallas-Fort Worth, Atlanta, New York, Potomac, St. Louis, Denver, Minneapolis-St. Paul, Chicago and Louisville.
Based in Massachusetts, Raytheon Company is one of the largest aerospace and defense companies in the U.S., with a diversified line of military products, including missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems, naval systems, air traffic control systems and technical services.
Raytheon is one of the best-positioned companies among the large-cap defense players because of its non-platform-centric focus. Looking forward, the company enjoys strong order booking and orders backlog, operational improvements and an above industry average ROE.
Raytheon’s strong balance sheet provides financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.
Raytheon in March 2011 raised its quarterly dividend by 15%, bringing its annualized dividend rate to $ 1.72 per share from the previous payout rate of $ 1.50 per share.
As a result the company will now pay a quarterly dividend of $ 0.43 per share to its shareholders, compared with $ 0.375 paid earlier. The increased quarterly dividend will be paid on April 28, 2011 to shareholders of record as on April 6, 2011.
Raytheon’s new annualized dividend rate reflects a current yield of 3.4%. This compares favorably with the current dividend yields of its closest peers – FLIR Systems Inc. (FLIR) with a yield of 0.7% and L-3 Communications Holdings Inc. (LLL) with a yield of 2.3%.
The above positives however are offset by apprehensions over future growth in the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations. The company presently retains a short-term Zacks #2 Rank (Buy) that corresponds with our long-term Neutral’ recommendation on the stock.
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