Raytheon Company’s (RTN - Free Report) Integrated Defense Systems (IDS) business unit recently won a $38.1-million contract for providing technical engineering support services for the Dual Band Radar (DBR) system. The contract was awarded by the Naval Sea Systems Command, Washington, DC.
Details of the Deal
Per the terms, Raytheon will provide technical engineering services for DBR system upgrades, product support services, test equipment procurement, installation integration support, combat system integration testing, program management support, along with other studies and analysis.
Work related to the deal will be executed in Tewksbury, MA. The rest of the work will be performed in Andover, MA; Moorestown, NJ and Arvonia, VA. Raytheon will utilize 2019 shipbuilding and conversion (Navy), and fiscal 2019 research, development, test, and evaluation funds for the task.
A Brief Note on Raytheon’s DBR Systems
The Dual Band Radar (DBR) is the first radar system in the U.S. Navy fleet, capable of simultaneously operating more than two frequency ranges (S-band and X-band), coordinated by a single resource manager. It combines the functionalities of the X-band AN/SPY-3 Multifunction Radar and the S-band Volume Surveillance Radar (VSR) to detect and track hostile targets. It also provides target illumination and uplink/downlink capabilities for SM-2 and Evolved SeaSparrow missiles.
In recent times, many developing nations are focusing on the modernization and technical advancement of new generation military radars, due to the rising threat of nuclear ballistic missiles. Such developments are likely to increase the global demand for radars, technical services and associated engineering support. Inevitably, this will boost growth prospects of missile manufacturers like Raytheon.
In line with this, Markets and Markets research firm expects the military radar market to witness significant growth over the 2017-2022 period. Notably, this market is projected to see a CAGR of 3.38% to $15.42 billion by 2022. Going forward, we may expect Raytheon to benefit significantly from such projections by strongly shifting its focus toward upgrading its radar systems.
Raytheon’s stock has lost 14.3% in the past 12 months, wider than the industry’s decline of 1.5%. The underperformance may have been caused by the tough competition the company faces in the defense market.
Zacks Rank & Stocks to Consider
Raytheon currently carries a Zacks Rank #3 (Hold).
A few better-ranked companies in the same sector are AeroVironment, Inc. (AVAV - Free Report) , The Boeing Company (BA - Free Report) and Heico Corporation (HEI - Free Report) .
While AeroVironment and Boeing sport a Zacks Rank #1 (Strong Buy), Heico carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AeroVironment came up with average positive earnings surprise of 257.01% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has increased 33.3% to $1.48 in the past 90 days.
Boeing came up with average positive earnings surprise of 28.01% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 4.47% to $18.22 in the past 90 days.
Heico’s long-term growth rate for the next five years currently stands at 12.10%. The Zacks Consensus Estimate for 2019 earnings has increased 4.00% to $2.08 in the past 90 days.
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