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Raytheon (RTN) Wins $202M Army Deal for PATRIOT Program

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Raytheon Company has won a foreign military sales (“FMS”) contract from the U.S. Army to provide engineering services for the PATRIOT weapon systems program.

Details of the Contract

The contract is valued at $202.2 million. It was awarded by the Army Contracting Command, Redstone Arsenal, AL.

Per the contract, Raytheon will provide engineering services to Germany, Israel, Japan, Republic of Korea, Saudi Arabia, Kuwait, Netherlands, Qatar, Spain and Taiwan.

Work is scheduled to be completed by Jan 31, 2018 and will be carried out across various locations. The contract will use fiscal 2017 other; other procurement (Army); operations and maintenance (Army); and research, development, test and evaluation funds.

A Brief Note on Patriot

PATRIOT is a long-range, high-altitude, all-weather system designed to counter threats from tactical ballistic missiles, cruise missiles and advanced fighter aircraft. This missile defense system was successfully used during the 1991 Gulf War and Iraqi War.

Like the U.S. and its allies, other nations across the globe are utilizing advanced technology to strengthen their defense systems. Raytheon makes the popular Patriot missile defense interceptors and has consistently focused on upgrading this missile defense system in order to keep pace with the changing dynamics of modern warfare.

The company believes that growing interest in including a 360-degree active electronically scanned array radar to the Patriot Air Defense systems would lead to sales growth.

Why Raytheon?

Raytheon’s Patriot missile-defense systems have seen a number of buyers in recent times including international customers like Qatar and Korea. Moreover, the company is progressing on the Patriot opportunity in Poland. In Sep 2016, Poland signed a letter of request with the U.S. for an integrated air and missile defense system based on Patriot. It is expected that the country will sign a FMS agreement with the U.S. government in 2017. With the addition of Poland, Raytheon sees emerging opportunities for its business expansion in the European region.

Management earlier stated that the IDS division, which includes the Patriot program, will likely return to recording margins of 16–17% in the next 2–3 years as international volumes step up and development programs progress.

FMS contracts continue to be a vital growth driver for Raytheon. International bookings comprised 38% of total fourth-quarter bookings. During the quarter, international sales were up 5.6%, representing 31% of total sales.

Price Movement

Raytheon’s stock has gained about 7.0% in the last three months, outperforming the Zacks Categorized Aerospace-Defense Equipment industry’s gain of 6.4%. This could be because Raytheon is one of the best-positioned large-cap defense players due to its non-platform-centric focus. Rising demand from the Gulf countries and Asia-Pacific, and growth in FMS contracts added to the positives. The company also poses strong competition to its peers including Ducommun Incorporated (DCO - Free Report) , Curtiss-Wright Corporation (CW - Free Report) and Aerojet Rocketdyne Holdings, Inc. .



Zacks Rank

Raytheon currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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