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Raytheon Inks Deal to Support Firepower Enhancement Program

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Raytheon Company (RTN - Free Report) announced that it has secured a $33.1 million contract from the U.S. Navy for Firepower Enhancement Program (FEP), System Technical Support.

Details of the Deal

The work related to the contract will be carried out at the company’s McKinney, TX facility. Additional funding related to the award will be obligated along with future delivery orders.

The order has been awarded with an initial five-year ordering period ranging from Aug 20, 2017 to Aug 20, 2022. It also comes with one option consisting of a five-year ordering period from Aug 21, 2022 through Aug 20, 2027. The entire work order is expected to be completed by Aug, 2027.

According to the Department of Defense, the development of FEP was aimed at implementing a second generation forward looking infrared that could detect and identify ranges under different battlefield conditions along with a far target location capability.

Why Raytheon?

Raytheon is one of the best-positioned large-cap defense players due to its non-platform-centric focus.  The company has been heavily investing in technological upgrades. In this context, Raytheon has been witnessing strong upside in its GaN–based naval radars. The company’s next-generation solutions include the air and missile defense radar (AMDR) and the enterprise air surveillance radar, which enable it to support the U.S. Navy and international customers with advanced capabilities to counter emerging threats.

Defense Scenario

With rising threats from North Korea along with expanding global terrorism, it has become extremely important for the United States to keep its defense weaponries updated.

The proposed budget hike for fiscal 2018 by President Trump reflected a 10% increase over the current base budget level of the current year, hinting at the U.S. government to spend more on defense. Recently, the U.S. House of Representatives passed the 2018 defense policy bill, reflecting an expenditure level of $696 billion. It exceeded President Trump’s defense budget request proposed this March. If enacted, all these budgetary updates will immensely boost the business growth of all defense giants including Raytheon, Northrop Grumman (NOC - Free Report) , Lockheed Martin Corp. (LMT - Free Report) , The Boeing Company (BA - Free Report) and many others.

Price Movement

In the last six months, shares of Raytheon have gained 15.1% compared to the industry’s gain of 13.1% in the same period of time.

Foreign military contracts continue to be the vital growth driver for Raytheon. Rising demand from the Gulf countries and Asia-Pacific will also boost revenues.

Zacks Rank

Raytheon currently holds 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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