) won three back-to-back defense contracts yesterday with a total
value of $195.9 million from Pentagon's total funding of $712.1
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Worth $172.7 million, the largest contract calls upon Raytheon to
manufacture and deliver the AN/TPY-2 Radar #12 with associated
spares. This is a modification contract whose delivery will be
extended from Dec 2013 through Mar 2016. The contract value can
potentially climb to $753.4 million.
The second contract, worth $16.3 million, is another modification
to a prior contract for maintenance work on U.S. Navy Standard
Missiles, and all-up-round recertifications of the same. All work
under the contract is slated to be completed by Dec 2014.
As per the third contract, Raytheon will provide follow-on
support related to system upgrades under the Taiwan Surveillance
Radar program. This contract modification is worth $6.9 million
and is expected to be complete by Nov 8, 2017. Raytheon in this
foreign military sales contract is creating a controlled
site-like testing environment for "build deployment" and system
troubleshooting for the Taiwanese system.
Investors may rightly be worried about the fate of the defense
industry in the U.S. However, Raytheon and other leading
Lockheed Martin Corp.
) have emerged relatively unscathed so far, thanks to foreign
contracts as well as small regular DoD contracts.
Recently, Raytheon received the green light from Pentagon for the
sale of some 15,000 anti-tank missiles to Saudi Arabia under two
separate deals. Pegged at a combined value of $1.1 billion, the
anti-tank missiles will be used to counter terrorism in this very
politically volatile region.
Apart from these important deals, Raytheon's business
consolidation efforts will also provide successful cost-saving
solutions, leading to an expanding operating margin in the long
The Massachusetts-based defense contractor - Raytheon - currently
holds a Zacks Rank #1 (Strong Buy). Other stocks worth
considering in the defense sector include
The Boeing Co.
Huntington Ingalls Industries, Inc.
). Both presently carry a Zacks Rank #2 (Buy).