Raytheon Gets Patriot Add-on

Raytheon Company (RTN - Analyst Report) was awarded a $116 million firm-fixed-price level-of-effort contract from the Army Contracting Command in Redstone Arsenal, Alabama. This is a modification of an existing contract to provide engineering services for the PATRIOT in support of Foreign Military Sales. Work on the contract will be performed in Andover, Billerica, Tewksbury, and Burlington in Massachusetts; El Segundo in California; El Paso in Texas; Huntsville in Alabama; Norfolk in Virginia; and Pelham and White Sands Missile Range in New Hampshire. Raytheon expects to finish work on the contract by Jan 31, 2014.

Patriot is the affordable, low-risk and effective air and missile defense system of choice of 12 countries around the globe. It is a long-range, all-altitude, all-weather air defense system that counters tactical ballistic missiles, cruise missiles and advanced aircraft. It is co-manufactured by Raytheon and Lockheed Martin Missiles and Fire Control, a business unit of Lockheed Martin Corporation (LMT - Analyst Report).

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 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.

Raytheon is one of the best-positioned companies among the large-cap defense players because of 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. Future growth will be driven by its focus on ISR unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD.

Going forward, revenue and earnings growth would continue to be driven by its strong and diversified presence in the areas of Intelligence, Surveillance and Reconnaissance (ISR); air traffic management; training and homeland security; and cyber security.

These positives are however offset by the uncertainty related to defense budgets, 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).

Other stocks to consider are Huntington Ingalls Industries, Inc. (HII - Snapshot Report) that retains a short-term Zacks Rank #1 (Strong Buy) and FLIR Systems, Inc. (FLIR - Analyst Report) that presently carries a short-term Zacks Rank #2 (Buy).