) has received a sizeable $534.8 million firm-fixed-price
contract for the production of Advanced Medium-Range Air-to-Air
Missiles (AMRAAM) for the U.S. Air Force and the militaries of
Oman and Saudi Arabia. With this contract, the company has become
one of the 14 lucky awardees who received an award from the
Department of Defense ("DoD").
Specifically, the company will produce approximately 1,800
missiles of AMRAAM Lot 27 with each piece carrying a price tag of
$300,000. Out of the total missiles produced approximately 51% of
the missiles will be sold to Oman and Saudi Arabia and the
balance 49% will go to the U.S. Air Force. The company expects
delivery to be completed by Jan 2016.
To date, the company has supplied AMRAAM missiles to 36 different
countries throughout the world.
Meanwhile, Raytheon along with
) became one of the beneficiaries of 22 separate contract awards
given by the DoD. The company received a $22.4 million contract
for the supply of 53 ECP-6279 retrofit kits for installation
aboard Navy F/A-18 E/F fighter jets and EA-18G electronic warfare
aircraft. The company expects delivery to be made by Jul 2015.
A few days back, the company received a follow-on contract from
The Boeing Company
) for the production of APG-63(V)3 active electronically scanned
array radars for the United States Air Force and Air National
Guard F-15C aircraft.
Also, the company received a subcontract to provide contractor
logistics support to the ground station elements for the U.S. Air
Force's fleet of RQ-4 Global Hawk unmanned aircraft systems.
This continuous flow of contracts does not prove that the company
is immune to the harsh effects of sequestration and declining
defense budgets. Per a media report, military personnel cuts
would comprise a major part of the $37 billion sequestration made
by the DoD. Particularly, military personnel cuts would amount to
$20.3 billion, procurement accounts would be reduced by $9.8
billion, and research funding would decline by $6 billion.
Construction, housing and management funds would absorb $1.1
billion of the cuts.
We note that Raytheon is one of the largest aerospace and defense
companies in the U.S., and provides a wide array of training,
space, logistics and engineering solutions for government and
civilian customers. The company has 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. The sequestration will thus affect the
company's top and bottom line greatly.
That said, Raytheon still enjoys a strong order backlog and
increasing bookings. The orders from the DoD have far from dried
up. Despite the tough times, as far as federal budgets are
concerned, Raytheon will be able to weather the storm on the back
of its sheer size and expertise. The company presently retains a
short-term Zacks Rank #2 (Buy).
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