) announced that it has received a two-year contract, worth $81
million, from the U.S. Army. The two-year contract includes a
one-year option period worth $18 million. Per the agreement,
Raytheon will manufacture a modified edition of the Advanced Field
Artillery Tactical Data System ("AFATDS") for the nation's ground
The Advanced Field Artillery Tactical Data System forms a part of
Raytheon's Network Centric Systems ("NCS"). This net-enabled battle
command is used for coordinating land and air indirect fire systems
for maneuver operations. It is utilized by the defense forces to
gather information to create a common operational picture.
These inputs enable them to plan, coordinate and control several
battlefield elements including attack helicopters, close air
support, field artillery cannons, mortars, Naval Surface Fire
Support systems and rockets.
The AFATDS is widely used at all levels of the U.S armed forces and
in allied defense establishments. In the U.S., this system is used
by the U.S. Army weapons platoon to corps and the Marine
In addition, AFATDS is also used in Allied field artillery
command and control ("C2") systems including BATES in the UK, the
French ATLAS, ADLER in Germany and the Italian SIR. To date,
Raytheon has installed 5,100 systems worldwide.
Like its peer
Lockheed Martin Corporation
), Raytheon has been providing dedicated services to U.S Army from
a long time. Recently, the company entered into an agreement, worth
$3.1 million, with the U.S. Army as part of its Morphing Network
Assets to Restrict Adversarial Reconnaissance ("MORPHINATOR")
program. This program utilizes cyber maneuvering techniques to
prevent potential attacks in a high-risk environment.
Earnings Highlights & Guidance
In second quarter 2012, Raytheon's earnings from continuing
operations were $1.41 per share compared with $1.20 per share in
the prior-year quarter. This was driven by operational improvements
and capital deployment events. Reported earnings surpassed the
Zacks Consensus Estimate of $1.21 per share.
Revenue was $5.99 billion, down 3.4% year over year from $6.20
billion in the year-ago period. Quarterly revenue missed the Zacks
Consensus Estimate by $30 million.
In its earnings press release, Raytheon increased its 2012 earnings
guidance to a range of $5.70-$5.85 per share from its previous
expectation of $5.55 - $5.70 per share. On the other hand, the
company maintained its sales guidance in a range of $24.5 - $25
billion for 2012.
The Zacks Consensus Estimates for Raytheon's third quarter 2012 and
full year 2012 earnings are $1.29 per share and $5.21 per share,
Raytheon enjoys steady order bookings and order backlog, an
improving balance sheet, and increasing cash flow along with
operational improvements. Year-to-date, Raytheon's NCS segment has
received contracts worth approximately $355.6 million from
different defense establishments.
We believe that the company's future growth depends on its
diverse programs such as ISR unmanned systems, training, cyber
security, Standard Missile-6, Patriot, Zumwalt and THAAD.
LOCKHEED MARTIN (LMT): Free Stock Analysis
RAYTHEON CO (RTN): Free Stock Analysis Report
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But we are skeptical about the U.S. defense budget, the fate of
high-cost programs, risks related to key project executions and
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. Raytheon Company currently retains a Zacks
#3 Rank, which translates into a short-term Hold rating.