Raytheon Gets Stunner Contract

Raytheon Company (RTN - Analyst Report) has received a contract, worth $30.2 million, for the continuous development of the Stunner interceptor from the Rafael Advanced Defense Systems. Per the contract, the company will manufacture Stunner interceptor’s missile subsystem hardware which also includes safety devices.

Stunner is an advanced, multi-mission, multi-platform interceptor that deliberately integrates into current and planned air and missile defense systems. It has the potential to defeat a variety of short-range ballistic missiles, large caliber rockets and cruise missiles.

Both Raytheon and Rafael had signed an agreement for production and development of the Stunner interceptor in 2009. The first flight tests of the Stunner missile are expected to be conducted in 2012. The company will also arrange for flight tests and low-rate initial production of the Stunner interceptor as per the current contract.

Meanwhile the company is also busy with radar contracts. Recently, the company received two orders to provide AN/TPY-2 radars to the Terminal High Altitude Area Defense (“THAAD”) missile defense system of the U.S. Army and United Arab Emirates (“UAE”).

Raytheon is one of the best-positioned companies among the large-cap defense players. Looking forward, the company enjoys strong order bookings and order backlog, an improving balance sheet, growing cash flow, and operational improvements.

This is, however, offset by apprehensions over future growth of 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 #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. The company provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services. Some of its main competitors are Lockheed Martin Corporation (LMT - Analyst Report) and Northrop Grumman Corporation (NOC - Analyst Report).