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Raytheon Company (RTN - Analyst Report) has received a $125.3 million contract from The Missile Defense Agency (“MDA”) and the U.S. Air Force. As per the contract, the company will be involved in the modernization and addition of a new competence power to an Air Force early warning radar (“EWR”) system.

Early warning radar is high-powered mission-critical and large phased-array radar. Post up gradation, the EWR will be targeting data that can be used to shoot down incoming ballistic missiles, besides providing early warning of missile launches and space surveillance.

In the up gradation process, the company will make use of the existing phased-array radar face and affix improved electronics and software in order to improve the performance and target detection.

The company expects the work to get completed by 2017. Till the completion of the up gradation, the currently deployed EWRs will continue uninterrupted operation, safeguarding the U.S. and its allies. The improvisation will allow the U.S. and its allies to detect and defend against missile launches with better skill.

Moreover, the upgraded radar will continue to perform as part of the Missile Warning and Space Surveillance Networks, and will be integrated into the MDA's Ballistic Missile Defense System as a part of the layered defense of the United States.

The MDA is a research, development, and acquisition agency within the Department of Defense. Its workforce includes government civilians, military service members, and contractor personnel in multiple locations across the United States. The company follows a trend of receiving contracts from MDA. Recently, in September, the company had received a $230 million contract from MDA for 14 Standard Missile-3 Block IA missiles and five SM-3 Block IB missiles.

Based in Waltham, Massachusetts, Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. The company provides high-tech 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.

Raytheon plays an important role in missile defense and is ideally positioned to help the United States and its allies achieve current and future missile defense goals. Given the declining trend in the U.S. defense spending, the company 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.

However, these positives are offset by apprehensions over the 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.

Some of its main competitors are L-3 Communications Holdings Inc. (LLL - Analyst Report) and FLIR Systems, Inc. (FLIR - Analyst Report).


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