Raytheon's SM-3 Successfully Tested - Analyst Blog

By Zacks Equity Research,

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Raytheon Company ( RTN ) successfully test fired a Standard Missile-3 (SM-3) Block IB for the Missile Defense Agency from the U.S. Navy's guided-missile cruiser, USS Lake Erie. The SM-3 is the newest incarnation of U.S. defense missile technology and replaces the medium-range ballistic missile.

The latest test was the 26th successful intercept for the SM-3 program, the highest to date. This was also the fifth consecutive test of the next-generation SM-3 Block IB guided missile.

The company is on track to supply the SM-3 Block IB in 2015 to meet global combatant command requirements, and specifically phase two of the European Phased Adaptive Approach. The SM-3 Block IB comes in both land-based and sea-based modes.

The SM-3 missiles incapacitate any incoming ballistic missile threat by colliding with them. To date, over 155 SM-3s have been supplied to the naval forces of U.S. and Japan. The SM-3 program has been the most successful defense product offering from Raytheon.

Recently, Raytheon received a big order from the Department of Defense (DoD) for the delivery of 86 Standard Missile 6 (SM-6) Block I All Up Rounds including spare parts and containers for the U.S. Navy.

Raytheon is expected to be among the few defense contractors to effectively weather the steep budget cuts by the U.S. government. The 2014 defense budget will retain or boost funding for most of Raytheon's notable programs like the SM-3 missile interceptor, the Advanced Medium-Range Air to Air Missile (AMRAAM) and the Standard Missile-2 and SM-6 ship defense missiles.

The U.S. defense is expected to procure 52 SM-3 Block IB missiles which will substantially add to Raytheon's sales book. Raytheon's AMRAAM project would also turn out to be a key winner with the DoD proposing $435 million worth of order flow in 2014. Moreover, the proposed increase in defense budget by Japan might bring in lofty foreign military sales contracts.

However, the cancellation of the SM-3 Block IIB version was a blow to the company. Currently, Raytheon holds a Zacks Rank #2 (Buy). Other well-placed operators include Zacks Ranked #2 Lockheed Martin Corp. ( LMT ), B/E Aerospace Inc. ( BEAV ) and Northrop Grumman Corp. ( NOC ).

B/E AEROSPACE (BEAV): Free Stock Analysis Report

LOCKHEED MARTIN (LMT): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

RAYTHEON CO (RTN): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Stocks
Referenced Stocks: BEAV , LMT , NOC , RTN

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