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Raytheon Clinches Air Force Deal

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Defense contractor Raytheon Company (RTN - Free Report) has received an indefinite delivery/indefinite quantity (IDIQ) contract from the U.S. Air Force for Network-Centric Solutions-2 (NETCENTS-2) Application Services.

Raytheon has been able to secure a place among the six awardees under the IDIQ that has a total combined maximum value of $960 million. Per the deal, Raytheon will supply an indefinite amount of IT related products and services for seven years to the U.S. Air Force. NETCENTS-2 supports the U.S. Air Force division by providing migration, integration, training, help desk, testing and program operations. Thus, this contract enables Raytheon to aid the U.S. Air Force in upgrading its service by installing secure communications network and mission-critical applications, saving cost and time.

Among the large-cap defense players, Raytheon is one of the best-positioned companies. Going forward, revenue and earnings growth would continue to be driven by its strong presence in the areas of Intelligence, Surveillance and Reconnaissance (ISR); air & missile defense systems; border security; air traffic management; training and homeland security; and cyber security.

Late last month, the company reported its second quarter 2013 earnings that exceeded our expectation by 26.1% and were also above the year-ago profit level by 4.5%. The beat was driven by strong program execution and the ability of the company to match the security needs of its customers through premium quality products.

Raytheon continues to surpass earnings expectations, thanks to its consistent research and development efforts. State-of-the-art technology and missiles developed by the company allow it to have a competitive edge and ensure a continuous flow of contracts from the U.S. defense department and from its global customers.

In addition, Raytheon’s focus on business diversification will lend substantial upside to returns. The strategic buyout of Visual Analytics Inc. at the end of the second quarter will further boost the company’s expertise in the field of data analysis, an effective defense tool to counter terrorism.

Raytheon currently holds a Zacks Rank #1 (Strong Buy). Other defense operators also worth mentioning are Zacks Ranked #2 (Buy) Lockheed Martin Corp. (LMT - Free Report) , Huntington Ingalls Industries, Inc. (HII - Free Report) and Northrop Grumman Corporation (NOC - Free Report) .

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