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Raytheon Wins $146M Navy Deal for Guided Missile Program

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Raytheon Company’s RTN Missile Systems unit recently secured a $146.1-million contract to provide guided missile round packs and spare replacement components for the Block 2 and 2A variants of the Rolling Airframe Missile (RAM) system. The contract was awarded by the Naval Sea Systems Command, Washington, DC.

The contract includes foreign military sales (FMS) to Germany, Turkey, Egypt, United Arab Emirates and Saudi Arabia. Majority of the work related to the deal will be executed in Ottobrunn, Germany, and Tucson, AZ. The entire task is scheduled to be completed by June 2025.

Importance of Guided Missile Weapon System

The RAM Guided Missile Weapon System, manufactured by Raytheon, is a cooperative development and production program, conducted jointly by the United States and Germany. Currently deployed on more than 165 ships in 11 countries, it has been specifically designed to protect ships of all sizes and destroy anti-ship missiles.

Its latest variant, Block 2, has a larger rocket motor, advanced control section and an enhanced RF receiver, capable of detecting the quietest of threat emitters. The improvements offer the Block 2 variant with the capability to defeat highly stressing threats, increasing the survivability of the defended ship.

What’s Favoring Raytheon?

Increasing geopolitical tensions along with a rise in terrorism across the globe are prompting nations to strengthen their defense systems manifold. With rapid technological upgrades, missile defense is steadily emerging to play a pivotal role in a nation’s defense strategy. With the United States being the world’s largest weapons supplier, it is a golden era for premier defense contractors like Raytheon.

Further, the U.S. government’s fiscal 2020 defense budget includes a significant spending plan of $13.6 billion on missile defense, 126.6% higher than the previous budget plan. Evidently, such an increased spending provision should usher in more contracts for Raytheon’s RAM Guided Missile program along with other major missile programs.

Per Markets and Markets, the rocket and missile market is projected to grow from $55.5 billion in 2017 to $70 billion by 2022, at a CAGR of 4.74%. Factors such as geopolitical issues, a rise in asymmetric warfare and terrorist activities, among others, across the globe are expected to drive the rocket and missile market during the forecast period. Such massive growth projections, thereby, offer Raytheon ample opportunities to enhance its share in the global missile market.

Price Performance

Shares of Raytheon have lost about 31.4% in a year compared with the industry’s decline of 34%.



Zacks Rank & Key Picks    

Raytheon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the same space are AeroVironment, Inc. AVAV, Moog Inc. MOG.A and Bae Systems PLC BAESY, each holding a Zacks Rank #2 (Buy).

AeroVironment came up with average positive earnings surprise of 5.72% in the last four quarters. The Zacks Consensus Estimate for 2020 earnings has risen 8.6% to $1.77 over the past 90 days.

Moog pulled off average positive earnings surprise of 4.76% for the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 0.9% north to $5.55 over the past 90 days.

Bae Systems’ long-term earnings growth estimate currently stands at 2.8%. The Zacks Consensus Estimate for 2020 earnings has climbed 5.8% to $2.55 over the past 90 days.

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