Raytheon Company (RTN - Free Report) recently won a contract for delivering its Forward Looking Infrared (FLIR) to support CH-53 helicopter and V-22 aircraft. Majority of the work related to the deal will be carried out in McKinney, TX and El Segundo, CA.
Valued at $59.7 million, the five-year contract was awarded by the U.S. Naval Supply Systems Command (NAVSUP) Weapon Systems Support, Philadelphia, PA. Raytheon will utilize fiscal 2018 Navy working capital funds to complete the delivery order for the first year of the deal.
A Brief Note on CH-53 & V-22
The CH-53 fleet of helicopters, manufactured by Sikorsky business division of Lockheed Martin (LMT - Free Report) , serves in varied missions like humanitarian aid, troop transport, casualty evacuation (CASEVAC), support of special operations forces, and combat search and rescue (CSAR). Notably, its latest version — CH-53K aircraft — is designed to be intelligent, reliable, low maintenance and survivable in the most austere and remote forward operating bases. This new heavy lifter is expected to help the U.S. Marine Corps and international militaries move troops and equipment from ship to shore, and to higher altitude terrain, more quickly and effectively than ever before.
V-22 Osprey is a multi-mission, tiltrotor military aircraft with both vertical as well as short takeoff and landing capabilities. It is designed to combine the functionality of a conventional helicopter with the long-range, high-speed cruise performance of a turboprop aircraft. The aircraft is manufactured by Bell-Boeing — a joint venture (JV) between Boeing (BA - Free Report) and Bell Helicopter, a unit of Textron Inc. (TXT - Free Report) .
What’s Favoring Raytheon?
Increasing geo-political tensions across the globe have prompted nations, both developed and developing, to strengthen their defense systems manifold. With rapid technological upgrade, identifying threats beforehand has become crucial and sensors play a critical role in that. To this end, being a prime defense contractor in the United States, Raytheon’s sensor systems hold a significant share of the U.S. sensor systems market.
The company’s Forward Looking Infrared (FLIR) leverages proven sensor technology to provide the warfighters with high-definition resolution and magnification of target images in darkness as well as in a range of adverse environmental conditions. No doubt, incorporating these next-generation sensors in the combat-proven CH-53 and V-22 aircraft will make them even more useful in the war front, thus bolstering the U.S. Air Force’s strength.
Notably, Raytheon’s 3rd Generation FLIR has entered the U.S. market lately. Therefore, we may expect more contract flows from the Pentagon for incorporating these sensors in other aircraft platforms as well. This, in turn,should boost Raytheon’s top line.
Meanwhile, the fiscal 2019 defense budget, which got approved by the U.S. Senate toward the end of June 2018, provisions for a spending plan of $12.9 billion for missile defense. Raytheon, being one of the top missile makers in the United States, will surely be a significant beneficiary from this budget.
In a year’s time, shares of Raytheon have gained 9.8% compared with the industry’s 18.3% growth. The underperformance may have been due to the stiff competition that the company faces in the aerospace and defense industry.
Raytheon currently carries 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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