) won a contract to supply radar systems to the U.S. Navy for the
Aegis program. Raytheon, which is producing these systems for
decades, said the multi-year order from the Navy is worth $406
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The contract calls for Raytheon to supply AN/SPY-1 radar
transmitters and MK99 Fire Control Systems for the aforementioned
program. Aegis is an improved weapons system installed on U.S.,
Japanese, Korean and Norwegian ships in order to protect against
airborne threats, including ballistic missiles.
Both these systems are an essential part of the Navy's Aegis
missile defense system. Over the past 32 years, these systems are
in continuous production and are in use aboard 109 warships
worldwide, comprising 17 ships sailed by foreign nations.
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 $32.2 billion at the end of the third quarter 2013. New
bookings in the quarter were $5.7 billion. Raytheon has been
known for introducing high-tech engineering and systems support
capabilities to the U.S. defense.
In addition, Raytheon is progressing well on its numerous
programs, namely, the Standard Missile-3 (SM-3) missile
interceptor, the Advanced Medium-Range Air to Air Missile, the
SM-2 and SM-6 ship defense missiles, Javelin anti-tank missile,
Rolling Airframe Missile, Small Diameter Bomb II and Tactical
Tomahawk. Successful completion of these programs will enable it
to get more orders in the future.
Recently, the defense player's third quarter earnings came up
above our expectation driven by strong program execution. It also
boosted its 2013 sales guidance to the range of $23.6-$23.8
billion from its prior expectation of $23.5-$23.7 billion.
Importantly, the company raised its adjusted earnings per share
guidance to a range of $6.10 to $6.20 from $6.00 to $6.10
earlier. The defense major also hiked its operating cash flow
from continuing operations forecast to the range of $2.2 billion
to $2.4 billion for full-year 2013 from its earlier forecast of
Hence sequestration or budget cut notwithstanding, this defense
contractor seems to be performing well, currently pursuing
cost-containment measures and is consolidating its business to
ward off the U.S. defense budget pressure. These initiatives will
enable the company to improve its margins, going forward.
Raytheon currently holds a Zacks Rank #1 (Strong Buy). One can
Lockheed Martin Corp.
Huntington Ingalls Industries, Inc.
General Dynamics Corp.
) as good buying opportunities. These defense operators hold a
Zacks Rank #2 (Buy).