Defense contractor Raytheon Co. (RTN) secured three contracts, amounting to $265.3 million, from Pentagon’s funding list yesterday.
The largest of the three contracts, worth $223.1 million, was awarded to Raytheon’s Missile Systems division of Tucson, AZ. Per the contract, the company will provide 485 new Sidewinder Missiles – AIM-9X Block II All Up Round Tactical Low Rate Initial Production Lot 14 Missiles – for the U.S. Navy, the U.S. Air Force as well as for the governments of Singapore, the Netherlands, Kuwait and Turkey.
Apart from other related units, the contract also entitles Raytheon to procure 132 Block II Captive Air Training Missiles for the U.S. Navy, U.S. Air Force, and the governments of the Netherlands, Singapore and Morocco. Work under this contract will likely run till Dec 2016.
The AIM-9X Block II missile is an advanced version of Raytheon's AIM-9X Block I Sidewinder infrared-guided, air-to-air missile that features a lock-on-after-launch capability, redesigned fuse and a one-way forward-quarter datalink capability. Unlike the AIM-9, the AIM-9X can even be used against targets on the ground.
The second contract, a minor one worth $28.2 million, also went to Raytheon Missile Systems. This modification contract calls for Raytheon to provide 774 AIM-9X Production Inertial Measurement Units retrofits and upgrades for the U.S. Navy and the U.S. Air Force. Additionally, the contract covers the procurement of 30 AIM-9X Block II All Up Round Tactical Low Rate Initial Production Lot 14 Missiles and 30 Block II Captive Air Training Missiles. Apart from that, 18 All Up Round Containers, 1 Spare Advanced Optical Target Detector, 2 Spare Tactical Guidance Units, 8 Spare Captive Air Training Missile Guidance Units, and 1 lot of tooling for the government of Belgium are also on order. The contract runs through Dec 2016.
As per the third contract, Raytheon will provide engineering and technical services required to support the ongoing development and life cycle support of the NATO SEASPARROW Surface Missile System (NSSMS), for $14.1 million. Raytheon will offer NSSMS design agent and special engineering tasks along with land-based test site support, software maintenance support as well as logistics management support services. This contract is slated to be completed by Jun 2016.
Raytheon 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.
The company’s unwavering focus on technological advancement, as exemplified by its evolving GaN systems, will fetch lucrative orders from the military. Its business consolidation efforts will also provide successful cost-saving solutions, leading to expanding operating margin in the long term. The 2014 fiscal budget puts emphasis on Raytheon’s prominent programs including Missile and Space systems, which will boost the company’s revenue stream.
On Jun 19, Raytheon Missile Systems division won a contract modification valued at $391.5 million to build radio-controlled anti-tank missiles for the U.S. Army and Marine Corps, as well as for the Saudi Arabia and Oman militaries. Deliveries will continue through Mar 2018.
In spite of the steady tricking in of low-priced contracts, the big ticket items still elude these defense majors. The tepid budget scenario seems to have put the lid on big awards in a sluggish defense industry.
Raytheon currently holds a Zacks Rank #3 (Hold). Favorably ranked stocks include Arotech Corporation (ARTX), Embraer S.A. (ERJ) and Northrop Grumman Corp. (NOC). While Arotech carries a Zacks Rank #1 (Strong Buy), Embraer and Northrop hold a Zacks Rank #2 (Buy).
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