Raytheon Company RTN has secured a $517.3 million contract from the U.S. Navy for providing engineering and manufacturing development needs for the Evolved Seasparrow Missile (“ESSM”) Block 2.
Per the contract, Raytheon will design, qualify and test ESSM Block 2 and be responsible for preparing the program for the ‘Milestone C’ decision, which is intended for FY18.
It must be noted that ESSM Block 2 is an international cooperative effort for the designing and development of ESSM Block 2 missiles and their testing and procurement.
The contract includes purchases by the Navy comprising about 40% of the production. It also includes foreign military sales to various governments, like those of Australia, Canada, Germany, the Netherlands, Denmark, Norway, Turkey, Spain, Greece and Portugal as part of the NATO Seasparrow Consortium.
Contract work is expected to be over by May 2019. Contracting activity is the Naval Sea Systems Command, WA, District of Columbia.
ESSM is the upgraded version of the RIM-7 Seasparrow Missile. It is a medium-range surface-to-air missile, developed by Raytheon’s unit, Raytheon Missile Systems. It provides protection against anti-ship missiles. It is capable of countering supersonic cruise missiles, which are considered a major threat to aircraft carriers.
It is part of the international cooperation between the U.S., the NATO and other allied nations. ESSM was initially developed by the U.S. Navy and nine member countries of the NATO Seasparrow Consortium.
Raytheon expects that ESSM will continue to receive support through 2030 and thereafter on customer needs. It is likely that the company’s strong fundamentals, focus on technological innovation and improvement of its product offering will ensure more contract wins and an enhanced growth trajectory, going forward.
Raytheon currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector are Huntington Ingalls Industries, Inc. HII, Rockwell Collins Inc. COL and Spirit AeroSystems Holdings, Inc. SPR. While Huntington Ingalls sports a Zacks Rank #1 (Strong Buy), Rockwell Collins and Spirit AeroSystems each carry a Zacks Rank #2 (Buy).
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