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Raytheon Company’s RTN business unit, Integrated Defense Systems (“IDS”), has won a 42-month engineering and manufacturing development (EMD) contract from the U.S. Navy for the Enterprise Air Surveillance Radar (EASR). Two configuration variants will be included in the EASR — a rotating phased array and a three-face fixed-phased array.

The contract is valued at $92.1 million. It includes options which could increase the cumulative value to $723.1 million, if exercised. Contracting activity is the Naval Sea Systems Command, Washington Navy Yard, District of Columbia.

Per the contract, Raytheon will manufacture, incorporate and analyze an EASR engineering development model (EDM). The contract starts with design work, followed by preliminary design review and system acceptance of the model at the end of testing.

Work is scheduled to be complete by Feb 2020. The majority of the work will be performed in Sudbury, MA, while the rest will be carried out in various locations across the U.S. The contract will use fiscal 2016 research, development and test and evaluation funds.

Raytheon is one of the best-positioned large-cap defense players due to its non-platform-centric focus. The company will continue to gain traction on the back of its strong fundamentals, focus on technological innovation and improvement of its product offering, which will ensure more contract wins and an enhanced growth trajectory.

The company has been enjoying a steady stream of contracts from several government establishments. As a result, total backlog at the end of the second quarter of 2016 was $35.31 billion, up from $34.49 billion at the end of second-quarter 2015.

Raytheon currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the aerospace and defense equipment sector may consider Ducommun Inc. DCO, Kratos Defense & Security Solutions, Inc. KTOS and Aerojet Rocketdyne Holdings, Inc. AJRD. While Ducommun and Kratos sport a Zacks Rank #1 (Strong Buy), Aerojet Rocketdyne carries a Zacks Rank #2 (Buy).

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