Raytheon in C2BMC Program with LMT

Raytheon Company (RTN - Analyst Report) has received a $38.1 million contract from the Missile Defense Agency to provide engineering support to its Command, Control, Battle Management, and Communications (“C2BMC”) program.

Earlier, in 2002, Lockheed Martin Corporation (LMT - Analyst Report) had received the contract for C2BMC program. Raytheon's Intelligence and Information Systems business now joins Lockheed as a sub-contractor and will assist and provide engineering support to the C2BMC program in terms of communications, systems architecture, modeling and simulation, integration and test, system analysis and sensor netting.

The C2BMC program is the hub of the Ballistic Missile Defense System (“BMDS”). It is an integral part of all system ground and flight tests, which verify and exercise all current and future BMDS capabilities. It is a vital operational system that enables the U.S. President, Secretary of Defense and combatant commanders at strategic, regional and operational levels to systematically plan ballistic missile defense operations and to dynamically manage designated networked sensors and weapons systems to achieve global and regional mission objectives. The program globally links, integrates and synchronizes individual missile defense elements, systems and operations.

We believe that Raytheon is one of the best-positioned companies among the large-cap defense players owing to its non-platform-centric focus. Looking forward, the company is in a favorable position considering the strong order bookings and order backlog, an improving balance sheet, growing cash flow, and operational improvements.

Recently, Raytheon Company reported fourth quarter and fiscal 2011 results. The company reported fourth-quarter adjusted earnings of $1.74 per share, beating the Zacks Consensus Estimate by 40 cents. In the fourth quarter of 2011, the company reported strong bookings of $7.1 billion versus $6 billion in the year-ago period. As of December 31, 2011, backlog was $35.3 billion compared with $34.6 billion in the year-ago period.

These positives are, 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. It 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.

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