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Raytheon Secures $482M Deal for MK 15 Close-In Weapon System

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Raytheon Company (RTN - Free Report) recently won a contract to deliver upgrades and conversions, system overhauls as well as associated hardware related to MK 15 Close-In Weapon System (CIWS). Work related to the deal is scheduled to be completed by Apr 2024.

The contract, valued at $482 million, was awarded by the Naval Sea Systems Command, Washington, DC. Work related to the contract will be performed in Melbourne, FL, Louisville, KS and other locations in the United States.

Significance of the MK 15 CIWS

MK 15 Phalanx CIWS is a fast-reaction, rapid-fire 20-millimeter gun system which has been designed to engage anti-ship cruise missiles and fixed-wing aircraft at short range. It provides ships of the U.S. Navy with an inner layer point defense capability against anti-ship missiles (ASM), aircrafts and littoral warfare threats that can infiltrate other fleet defenses.

Our view

Increasing geopolitical tensions in Europe, Asia Pacific and the Middle East are driving demand for military weapons. To reap the benefits of the expanding defense space, Raytheon, one of the best-positioned large-cap defense players in the United States, is heavily investing in technological upgrades. Consequently, its next-generation defense equipment has been attracting contract orders from Pentagon and foreign allies.

Evidently, the company witnessed a decent increase in its order backlog of $3.7 billion year over year to a new record backlog of approximately $40 billion in the second quarter of 2018. These impressive backlogs are likely to have encouraged the company to increase bookings outlook for 2018 by $1 billion. Upbeat bookings outlook indicates at optimistic order prospects for the company in the upcoming quarters. The latest contract win is a bright example of that and should enable Raytheon to achieve the aforementioned target.  

Moreover, in June 2018, the U.S. Senate approved the fiscal 2019 defense budget worth $717 billion, reflecting a 5% growth over the initial fiscal 2018 budget. Raytheon, being one of the prominent defense contractors, will benefit from the budgetary amendement.

Other companies from the same the same space like Aerojet Rocketdyne Holdings (AJRD - Free Report) , AAR Corp. (AIR - Free Report) and AeroVironment, Inc (AVAV - Free Report) are also expected to gain significantly from this budget revision.

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