Raytheon Gets Navy Contract - Analyst Blog

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Raytheon Company ( RTN ) has received a $79 million contract from the U.S. Navy for 47 more Navy Multiband Terminal (NMT) systems.

NMT is one of three Raytheon Advanced Extremely High Frequency (AEHF) terminals that are in production. The other two are the U.S. Army's Secure Mobile Anti-jam Reliable Tactical Terminal and the U.S. Air Force's Minuteman Minimum Essential Emergency Communications Network Program Upgrade. Raytheon is the only provider of deployed AEHF terminals to the U.S. armed forces.

NMT has been in production since 2010. In total, Raytheon is expected to field more than 350 AEHF NMT terminals to the U.S. and international partners under the production contract. The NMT system incorporates Raytheon's demonstrated XDR waveform, a complex protected communications protocol which is implemented in hardware and software. XDR provides users with increased bandwidth and speed, enabling strategic and tactical military communications.

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 ) and Lockheed Martin Corporation ( LMT ).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BA , ISR , LMT , NMT , RTN

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