Raytheon Bags Navy Contract

Raytheon Company (RTN) bagged a $241 million U.S. Navy contract to deliver open architecture software capability for the Zumwalt-class destroyer (DDG 1000). Under the contract, software development will support the integration of human-computer- interface components for the ship's engineering machinery controls and damage control systems.

Specifically, Raytheon will deliver computer graphical user interfaces and a technical data manager capability to control Zumwalt's ship propulsion, integrated power, auxiliary and damage control systems. The effort will also include support to land-based and shipboard testing of these subsystems.

Work on this contract modification will be performed at Raytheon’s Integrated Defence Systems Headquarters, Tewksbury, Massachusetts, and at the Seapower Capability Center, Portsmouth, Rhode Island.

The contract will boost the backlog of the Raytheon Integrated Defense Systems segment. In the recently reported quarter, segmental backlog was stagnant at $9.8 billion compared to $9.9 billion as of year-end fiscal 2008.

Raytheon is the one of the largest aerospace and defense companies in the U.S. It boasts of a well-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.

We continue to view Raytheon as one of the best positioned among the large-cap defense primes due to its non-platform-centric focus, strong order bookings and order backlog, strong cash flow generation, and focus on shareholder value. We maintain our market Outperform recommendation on the shares. Defense contractors with significant exposure to high-cost platform programs include Lockheed Martin (LMT), Northrop Grumman Corporation (NOC), and General Dynamics Corporation (GD).

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