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Raytheon Wins Army Deal to Upgrade Patriot Missile for Qatar

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Raytheon Company (RTN - Free Report) recently won a modification contract for supplying technical assistance and new equipment training related to its Phased Array Tracking Radar Intercept on Target (PATRIOT) Missile System. The deal is expected to close by May 31, 2019.

Valued at $10.7 million, the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Alabama. Fiscal 2018 foreign military sales (FMS) funds will be utilized to complete the task, which will be executed in Doha, Qatar.

A Brief Note on Patriot Missile System

Patriot is a long-range, high-altitude and all-weather missile defense system. It consists of radars, command-and-control technology and multiple types of interceptors. The system helps to detect, identify and counter tactical ballistic missiles, cruise missiles, drones, advanced aircraft and other threats.

In fact, Raytheon has consistently remained focused on upgrading this defense system to keep pace with the changing dynamics of modern warfare. Resultantly, the Patriot system has become the foundation of integrated air and missile defense for 15 nations.

What’s Favoring Raytheon?

Increasing geopolitical tensions across the globe prompted nations, both developed as well as developing, to strengthen their defense systems. With rapid technological upgrade, missile defense has emerged as an integral part of the defense strategy for all countries.

Being a prominent missile-maker, Raytheon manufactures a variety of missiles. Till date, it has built more than 220 Patriot fire units. Needless to say that the company often enjoys a solid inflow of missile contracts from Pentagon and the latest deal proves that.

Apart from Patriot missiles’ forte in the domestic market, this defense system has seen a number of international buyers in recent times, including Qatar, Korea, Poland and others. Notably, Raytheon secured a $4.8 billion contract from Poland to deliver Patriot Missile Systems, after signing a Letter of Offer and Acceptance (LOA) agreement with the U.S. government for the same.

We believe such solid order flow for the Patriot Missile Systems are likely to boost Raytheon’s top-line growth. In first-quarter 2018, revenues at its Integrated Defense Systems (IDS) division, which includes the Patriot program, improved 7% year over year to $1,553 million. Moving ahead, we expect similar deals like the latest one to instil further growth in this segment.

Currently, the rocket and missile market is projected to grow from $55.5 billion in 2017 to $70 billion by 2022, at a CAGR of 4.74%, during the forecast period (as per Markets and Markets research firm). This huge growth prospect in the rocket and missile market, should allow Raytheon to further increase its market shares in the aerospace and defense industry.

Price Movement

In a year’s time, shares of Raytheon have surged about 30.3% compared with the broader industry’s increase of 29.4%. The outperformance was most probably led by the company’s strong international sales and a robust balance sheet.


Zacks Rank & Stocks to Consider    

Raytheon currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are AeroVironment (AVAV - Free Report) , Boeing (BA - Free Report) and Wesco Aircraft Holdings (WAIR - Free Report) . While AeroVironment sports a Zacks Rank #1 (Strong Buy), Boeing and Wesco Aircraft carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment delivered an average positive earnings surprise of 147.43% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings rose by 10 cents to $1 in the past 60 days.

Boeing pulled off an average positive earnings surprise of 29.51% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved north by 56 cents to $14.61 in the past 60 days.

Wesco Aircraft came up with a positive earnings surprise of 29.41% in the second quarter of fiscal 2018. The Zacks Consensus Estimate for fiscal 2018 earnings moved up by 7 cents to 77 cents in the past 60 days.

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