) has received an international order worth $106 million for its
Paveway II smart bombs. Per this direct commercial sale
contract, the company will provide Paveway kits for both GBU-12
(500lb) and GBU-58 (250lb) guided bombs.
Paveway is a kit designed by Raytheon and provides warfighter
accuracy and standoff capability that has revolutionized tactical
air-to-ground warfare by converting dumb bombs into
precision-guided munitions. Bombs equipped with Paveway kits have
been tested and proven in every major conflict in which it has
The improved version of Paveway includes Global Positioning
System ("GPS")/Inertial Navigation System guidance capabilities.
The new version is a combination of precision and flexibility of
traditional laser-guided weapons and all-weather capability of
Inertial Navigation System guidance. The old and new versions put
together evolves into a weapon that enhances the mission success
rate while lowering the requisite sortie count and weapon
In Nov 2012, the company had received a contract worth $422
million for its combat-proven Paveway II family of
precision-guided munitions. The contract was under a direct
commercial sale from an international customer.
Raytheon is one of the best-positioned companies among the
large-cap defense players. The company competes with
Lockheed Martin Corporation
) for the supply of laser guided bombs to customers.
Raytheon has been meeting the needs of the U.S. armed forces as
well as allied nations with its Paveway line-up of bombs.
Recently, Raytheon received a contract from the U.S. Air Force
to provide up to 18 Deployable Radar Approach Control systems.
The contract will likely be worth $260 million though Raytheon
has been authorized $50.6 million for the early development stage
of the D-RAPCON units.
Going forward, revenue and earnings growth would continue to
be driven by its strong presence in the areas of Intelligence,
Surveillance and Reconnaissance; air & missile defense
systems; border security; air traffic management; training and
homeland security; and cyber security.
However, we are concerned about the uncertainty stemming from
the U.S. defense budget, the fate of high-cost programs, risks
related to key project executions and order cancellations. The
company presently retains a short-term Zacks Rank #3 (Hold).
However, stocks worth considering in the defense space are
B/E Aerospace Inc.
Alliant Techsystems Inc.
), both with a Zacks Rank #2 (Buy).
ALLIANT TECHSYS (ATK): Free Stock Analysis
B/E AEROSPACE (BEAV): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
RAYTHEON CO (RTN): Free Stock Analysis Report
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