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Raytheon Gets Tomahawk Contract

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Raytheon Company (RTN - Free Report) has been awarded a $337.8 million firm-fixed-price contract for the procurement of 361 Tomahawk Block IV All-Up-Round missiles for the U.S. Navy.  The Tomahawk Block IV missile is capable of launch from surface ships equipped with the Vertical Launch System (VLS) and submarines equipped with the Capsule Launch System (CLS). 

Out of 361 missiles for the procurement, 238 would be VLS missiles and the rest CLS missiles. The Naval Air Systems Command, Patuxent River, Maryland, is the contracting activity.

Work on the contract will be performed mainly in Tucson, Arizona; Camden, Arkansas; Ogden, Utah; Anniston, Alabama; Minneapolis, Minnesota; Fort Wayne, Indiana; Glenrothes, Scotland; Dallas, Texas; Spanish Fork, Utah; and various locations inside and outside the continental United States. Work on the contract is expected to be completed in August 2014. 

Raytheon is one of the best-positioned companies among the large-cap defense players due to its non-platform-centric focus, as well as its strong order bookings and order backlog of more than $34 billion at the end of the first quarter of 2012.

Revenue and earnings growth continue to be driven by a strong presence in the areas of Intelligence, Surveillance and Reconnaissance (ISR); air & missile defense systems; border security; air traffic management; training and homeland security; and cyber security. Also its non-platform centric focus insulates it from cancellation or deferral of any specific platform programs.

Looking forward, the company enjoys strong order bookings and order backlog, an improving balance sheet, and growing cash flow, besides operational improvements. Future growth will be driven by its focus on ISR unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD. The company presently retains a short-term Zacks #2 Rank (Buy).

This is, however, offset by apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations. Thus, over the longer run, we maintain our long-term Neutral recommendation on the stock.

Based in Massachusetts, Raytheon Company is one of the largest aerospace and defense companies in the U.S., with a diversified line of military products, including missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems, naval systems, air traffic control systems, and technical services. Some of its main competitors include The Boeing Company (BA - Free Report) and Lockheed Martin Corporation (LMT - Free Report) .

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