Raytheon to Make HARM at Full Rate

Raytheon Company (RTN - Analyst Report) has received a contract to start the full rate production of High-Speed Anti-Radiation Missile (“HARM”) Control Section Modification (“HCSM”) upgrade units. The contract is worth $12.3 million.

The High-Speed Anti-Radiation Missile is the key battlefield element that destroys surface-to-air missile radars, early warning radars and radar-directed air defense artillery systems. The missile has made hostile airspaces worldwide, which is safer for the U.S. and allied warfighters.

Control Section Modification also has a digital flight computer that amalgamates targeting solutions with navigation and seeker systems. These improvements and modifications increase the chances of hitting the target accurately while enabling to decide where the missile can or cannot fly.

With the inclusion of Control Section Modification, a Global Positioning System (“GPS”) receiver and an improved inertial measurement unit (“IMU”) for precision navigation is added to HARM. The GPS is a space-based satellite navigation system that provides location and time information in all climatic conditions anywhere on the Earth, where there is an unobstructed line of sight. The system provides critical capabilities to military, civil and commercial users around the world. Moreover, besides reducing the risk of fratricide or collateral damage, modification allows HARM to degrade counter-HARM tactics.

Recently, Lockheed Martin Corporation (LMT - Analyst Report) had also received a contract from the U.S. Air Force Space Command Space and Missile Center to provide support to the ground control systems in the Global Positioning System (“GPS”) satellites programs.

Based in Waltham, Massachusetts, Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. Raytheon provides modern 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 is one of the best-positioned companies among the large-cap defense players due to its non-platform-centric focus. Looking forward, the company enjoys strong order bookings and order backlog, an improving balance sheet, growing cash flow, and operational improvements.

However, we prefer to remain on the sidelines due to the 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 Rank #3 (Hold) that corresponds with our long-term Neutral recommendation on the stock.