Raytheon Company’s Missile Systems (MS) business division recently secured a $28.8 million modification contract to offer maintenance and repair support for fiscal 2020 Standard missile SM-2 and Standard missile SM-6. The deal was awarded by the Naval Sea Systems Command, Washington, DC.
Majority of work related to the deal will be executed in Camden, AR, and will cater to the U.S. Navy. Per the terms of the deal, Raytheon will provide engineering and technical support, depot and intermediate level repair, maintenance and recertification of standard missiles, sections, assemblies, subassemblies as well as components.
The project is expected to get completed by December 2020.
SM-2 and SM-6 Specifics
The Standard Missile-2 (SM-2) system provides superior anti-air warfare and limited anti-surface warfare capability against advanced anti-ship missiles and aircraft. The missile is lethal against subsonic, supersonic, high-maneuvering, anti-ship cruise missile fighters, bombers and helicopters in an advanced electronic countermeasures environment.
The Standard Missile-6 (SM-6) system is an endo-atmospheric interceptor, which engages cruise, aircraft and ballistic missiles in the terminal phase. Deployed on cruisers and destroyers in the U.S. Navy, SM-6 is the only missile that supports anti-air warfare, anti-surface warfare and sea-based terminal ballistic missile defense.
What’s Favoring Raytheon?
In recent times, missile defense has steadily emerged as a key growth driver in a nation’s defense strategy due to increasing geo-political tensions across the globe. To this end, Raytheon, a prominent U.S. missile maker, has been clinching frequent awards from the United States as well as international customers, courtesy of its high-end, combat-proven missiles.
Notably, the company’s MS division recorded third-quarter 2019 net sales of $2,082 million, reflecting a 4% improvement from the year-ago quarter. Considering this, we may expect contracts like the latest one to instill further growth in this segment.
Per the Markets and Markets research firm, the rocket and missile market is projected to see a CAGR of 4.74% from $55.5 billion in 2017 to $70 billion by 2022. This, in turn, should boost Raytheon’s growth prospects.
In a year’s time, shares of Raytheon have gained 27.7% compared with the industry’s 34.4% growth.
Zacks Rank & Key Picks
Raytheon currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Curtiss-Wright Corporation CW, CAE Inc. CAE and Teledyne Technologies Inc. TDY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Curtiss-Wright delivered an average positive earnings surprise of 8.40% in the last four quarters. It currently boasts a solid long-term earnings growth estimate of 8.3%.
CAE Inc. delivered a positive earnings surprise of 10.53% in the last reported quarter. It currently boasts a solid long-term earnings growth estimate of 10%.
Teledyne has recorded an average positive earnings surprise of 10.13% in the last four quarters. It currently boasts a solid long-term earnings growth estimate of 7.5%.
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