Raytheon Co. RTN has recently entered into a contract to sell Patriot missile-defense systems to an undisclosed foreign buyer for $2 billion, bringing its total international orders for the air-defense system to $5 billion since last December.
Though the company's shares moved down since the announcement, the company made a significant headline yesterday as it entered into an agreement with Vista Equity Partners to form a new company integrating Websense and Raytheon Cyber Products.
Now, the latest award involves new Patriot launching systems for advanced threat detection, identification and engagement. The contract also comprises a full training package and support equipment. Raytheon, which is slated to report its first quarter results on Apr 23, stated that the contract will be booked in the second quarter as a direct commercial sale.
Patriot is a long-range, high-altitude, all-weather system developed to counter threats from tactical ballistic missiles, cruise missiles and advanced fighter aircraft. This missile defense system was successfully used during the 1991 Gulf War and Iraqi War.
Like the U.S. and its allies, other nations across the globe are also utilizing advanced technology to strengthen their defense systems. The Patriot missile defense system has continuously been upgraded to keep pace with the changing dynamics of modern warfare.
Raytheon’s Patriot missile-defense systems have seen a number of buyers in the past five months from many international customers including Qatar and Korea.
As the world’s largest missile maker, Raytheon witnesses healthy demand for its products, particularly from foreign customers. In 2014, international sales were 29% of total net sales. Rising demand from the Gulf countries as well as from the Asia-Pacific region will likely be the company’s key revenue driver.
In an age of budget austerity, the U.S. Department of Defense is trying to cut back on big ticket programs – hence the Patriot, albeit with some minor upgrades, continues to find support from the Congress.
Raytheon currently has a Zacks Rank #3 (Hold). Better-ranked players in the industry include Zacks Ranked #1 (Strong Buy) Astronics Corp. ATRO and Spirit AeroSystems Holdings, Inc. SPR, as well as Zacks Ranked #2 (Buy) Rockwell Collins Inc. COL.
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