Raytheon CompanyRTN recently secured an $81.2-million modification contract to procure 228 retrofit components for the configuration updates of the EA-18G and F/A-18E/F aircraft, for the U.S. Navy and the government of Australia. The deal was awarded by the Naval Air Systems Command, Patuxent River, MD.
Work related to the deal will be executed in Forest, MS; Andover, MA and El Segundo, CA. The entire task is expected to get completed by February 2022.
What Favors Raytheon?
In the backdrop of increasing geopolitical uncertainties around the world, many developing countries like India have significantly expanded their defense spending. This, in turn, has bolstered demand for weaponries, and with the United States being the largest weapon exporter, major defense contractors in the nation enjoy a dominant position in the defense space. Raytheon, being one such contractor, surely witnesses frequent flow of contracts from Pentagon as well as foreign allies of the United States for its varied products.
Such contracts tend to boost the company's Space and Airborne Systems (SAS) unit, which develops integrated sensors, retrofit components and aircraft communication systems. Evidently, this segment registered an annual sales growth of 6% in the third quarter of 2018.
Now, the U.S. fiscal 2019 defense budget provisioned major war fighting investments worth $21.7 billion for aircraft. The budget further included an investment plan of $2 billion for 24 of Boeing's BA F/A-18 jets.
Such budgetary developments should benefit Raytheon's SAS unit, going ahead, as it would acquire more contracts related to aircraft retrofit components, thereby bolstering the company's overall profit margin.
Raytheon's stock has lost 19.8% in the past 12 months, wider than the industry 's decline of 4.1%. The underperformance may have been caused by the tough competition the company faces in the defense market.
Zacks Rank & Stocks to Consider
Raytheon currently carries a Zacks Rank #3 (Hold).
A few better-ranked companies in the same sector are AeroVironment, Inc. AVAV and Teledyne Technologies Incorporated TDY , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
AeroVironment came up with average positive earnings surprise of 257.01% in the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has increased 33.3% to $1.48 in the past 90 days.
Teledyne Technologies came up with average positive earnings surprise of 12.92% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 5.26% to $9.00 in the past 90 days.
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