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Raytheon Acquires $315M Deal for Griffin Missile Production

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Raytheon Company’s (RTN - Free Report) Missile Systems (MS) business unit recently won a $315 million deal for the production of the Griffin Missiles. The contract was awarded by the U.S. Special Operations Command Contracting Office, Tampa, FL.

Details of the Deal

Per the terms of the deal, Raytheon will also provide related assistance for product improvement, operations and sustainment for the Griffin Missiles. Work related to the deal will be performed at the contractor facilities in Tucson, AZ.

The company will utilize fiscal 2018 research, development, and testing and evaluation funds for completing the tasks. Raytheon may also secure additional funding on a delivery/task-order basis.

Advantages of the Griffin Missiles

Raytheon’s Griffin Missile System is a combat-proven missile, which has been serving the U.S. Air Force and U.S. Navy force since its inception in 2008. It is a multi-platform and a multi-service weapon that has a proven track record of successful rapid integration on land, sea and air platforms.

The missile system can engage both static and fast-moving targets, and offers reliable operational effectiveness to fighters against a variety of threats in counter-insurgency and irregular warfare operations. It also provides lethal effects, and employs GPS-aided inertial guidance and a semi-active laser seeker for pinpoint accuracy.

What’s Favoring Raytheon?

Increasing geo-political tensions across the globe have prompted nations to strengthen their defense systems manifold. With rapid technological upgrade, missile defense has steadily emerged to play a pivotal role in a nation’s defense strategy.

To this end, Raytheon’s advanced MS segment has been clinching significant awards from the United States as well as international customers, courtesy of its high-end, combat-proven arsenals. The latest contract win is an evidence to that.

Notably, the MS division recorded first-quarter 2018 net sales of $1,848 million, reflecting a 5% improvement from the year-ago quarter. We may expect the aforementioned contract to instill further growth in this segment, going ahead.

Furthermore, the recently approved fiscal 2019 defense budget includes a spending plan of $12.9 billion on missile defense for Raytheon. Such favorable budgetary developments reflect solid growth prospects for Raytheon’s Griffin missiles and other missile programs going ahead, which, in turn, are likely to boost the company’s profit margin.

Moreover, 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). Given this huge opportunity for expansion, frequent contract wins from Pentagon for its high-end missile programs, including the latest one, will allow Raytheon to further enhance its market share in the aerospace and defense industry.

Price Movement

Raytheon’s stock has gained 19.6% in the last 12 months, compared with the industry’s growth of 23.1%. The underperformance may have been caused due to tough competition that the company faces in the defense market.

 



 

Zacks Rank & Key Picks    

Raytheon currently holds a Zacks Rank #3 (Hold). A few top-ranked stocks in the same sector are Kratos Defense & Security Solutions (KTOS - Free Report) , Northrop Grumman (NOC - Free Report) and CPI Aerostructures, Inc. (CVU - Free Report)

While Kratos Defense & Security Solutions and Northrop Grumman sport a Zacks Rank #1 (Strong Buy), CPI Aerostructures carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kratos Defense & Security Solutions delivered an average positive earnings surprise of 9.52% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 11.8% to 19 cents in the last 90 days.

Northrop Grumman came up with an average positive earnings surprise of 13.87% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 7% to $16.62 in the last 90 days.

CPI Aerostructures delivered an average positive earnings surprise of 20.08% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 8.86% to 86 cents in the last 90 days.

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