Raytheon Co. (RTN - Free Report) has been able to lock two small contacts, worth $64.5 million in total or 40% of the Pentagon’s defense funding list of Dec 9, 2013.
The first contract, worth $35 million, is a modification of a previously awarded contract to perform additional engineering work on the MK-31 Rolling Airframe Missile (RAM) Guided-Missile Weapon System (GMWS) improvement program. The company is entitled to provide guided-missile round pack support and guided-missile launching system support. Raytheon will continue working on this project through Sep 2014.
The other contract, worth $29.5 million, is also a contract modification of a previously awarded contract, where Raytheon is responsible for the supply of the AN/SPY-1D(V) radar transmitter group, missile fire control system MK 99 and site support for DDG 119. The defense major will also offer related technical services to facilitate system testing, shipyard installation, and other requirements through Jun 2017.
Though the contracts are not much to speak of, these still offer some respite from severe budget austerities. To counter the impact of defense budget cuts, the defense majors are relying on foreign orders. Raytheon recently received the green light from Pentagon for the sale of some 15,000 anti-tank missiles to Saudi Arabia under two separate deals. Pegged at a combined value of $1.1 billion, the anti-tank missiles will be used to counter terrorism in this very politically volatile region.
The 2014 fiscal budget has nevertheless prioritized investments in Missile and Space Systems, which is expected to bring in more contracts for Raytheon. In addition, the company’s focus on technological advancements, as exemplified by its GaN systems, will make defense solutions affordable and effective.
Raytheon’s business consolidation efforts will also provide successful cost-saving solutions, leading to an expanding operating margin in the long term.
The Massachusetts-based defense contractor – Raytheon – currently holds a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the defense sector include The Boeing Co. (BA - Free Report) , Huntington Ingalls Industries, Inc. (HII - Free Report) and General Dynamics Corp. (GD - Free Report) . The above stocks presently carry a Zacks Rank #2 (Buy).