The Massachusetts Department of Transportation has awarded a $130 million contract to Raytheon Company (RTN - Free Report) and a team of local companies to upgrade its existing highway tolling systems.
Per the contract, Raytheon will replace the existing highway tolling system with an advanced system that will automatically toll vehicles as they travel under a gantry similar to an overhead sign. Raytheon will utilize its expertise in sensors and systems design to install the All Electronic Tolling System (AETS).
Once this new tolling system comes into use, drivers will be able to pass through the toll station at highway speeds without needing to stop. This will help reduce traffic congestion, travel times and emissions from stop-and-go driving at existing toll plazas.
The new system will read the E-ZPass transponders fitted in the vehicles and, in case a vehicle does not have a transponder, this system will perform image base tolling. A toll invoice will then be sent to the registered owner of the vehicle.
Raytheon will start installing the new tolling system from Apr 2015 and expects to complete it by Dec 2015. Per the contract, Raytheon will convert the Western Massachusetts Turnpike (I-90), Metropolitan Highway System, Sumner/Callahan and Ted Williams Tunnels, and the Tobin Bridge.
We believe the need for good roads and busy highways could increase the demand for advanced tolling systems going forward. Raytheon with its expertise in this field will surely play a major role in the tolling system market. In fact, the company had installed the world's first AETS on the 407 Express Toll Route in Toronto, Canada way back in 1997.
As the U.S. defense budget is under the axe, we believe both foreign military sales and non-military domestic contracts like the one mentioned above will help Raytheon to post steady performances. The company in its recent second-quarter earnings release reiterated its top-line guidance in the range of $22.5–$23.0 billion and earnings from continuing operations forecast in the range of $6.75–$6.89 per share for 2014.
Raytheon currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include The Boeing Company (BA - Free Report) , Lockheed Martin Corporation (LMT - Free Report) and Northrop Grumman Corporation (NOC - Free Report) . All these stocks hold a Zacks Rank #2 (Buy).