Raytheon CompanyRTN recently secured a foreign military sales (FMS) contract for providing staffing and training services to support the Qatar Patriot Air Defense Missile Systems.
Valued at $150.4 million, the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, Huntsville, AL. Raytheon will utilize fiscal 2018 foreign military sales funds to complete the task.
Work related to the deal will be performed in Doha, Qatar and is scheduled to be completed by Mar 15, 2018.
Patriot Air Defense System
Patriot is a long-range, high-altitude and all-weather missile defense system. It consists of radars, command-and-control technology and multiple types of interceptors. The system helps to detect, identify and counter tactical ballistic missiles, cruise missiles, drones, advanced aircraft and other threats.
Raytheon has consistently remained focused on upgrading this defense system to keep pace with the changing dynamics of modern warfare. This must have enabled the Patriot system to become the foundation of integrated air and missile defense for 14 nations.
What's Favoring Raytheon?
Increasing geopolitical tensions across the globe prompted nations, both developed as well as developing, to strengthen their defense systems. With rapid upgradation in technology, missile defense has emerged as an integral part of the defense strategy for all countries.
Being a prominent missile-maker, Raytheon manufactures a variety of missiles. Till date, it has built more than 220 Patriot fire units. Needless to say that Raytheon frequently enjoys a solid inflow of missile contracts from Pentagon and the latest deal proves that. In January 2018, Raytheon clinched a new direct-commercial contract for PATRIOT capabilities, worth more than $1.5 billion along with procuring a $2.3 billion PATRIOT contract in February. In fact, apart from PATRIOT missiles' strong forte in the domestic market, this defense system has seen a number of international buyers in recent times including Qatar, Korea, Poland and others. In this regard, Sweden is expected to sign a Letter of Agreement (LOA) in mid-2018, worth approximately $1 billion.
Without any doubt, such solid order flow for the system is capable of boosting Raytheon's top line. The company's Integrated Defense Systems (IDS) division, including PATRIOT program, recorded fourth- quarter 2017 net sales of $1,553 million, reflecting a 6% improvement from the year-ago quarter. We expect the latest contract to instill further growth in this segment in the days ahead.
Currently, the rocket and missile market is projected to grow from $55.5 billion in 2017 to $70 billion by 2022, at a CAGR of 4.74%, during the forecast period (as per Markets and Markets research firm). Given this huge opportunity for expansion, frequent contract wins from Pentagon for its high-end missiles like Patriot, including the latest one, will allow Raytheon to further enhance its market shares in the aerospace and defense industry.
Raytheon's stock improved about 35.7% in the last 12 months compared with the broader industry 's gain of 31.4%. The outperformance was primarily led by strong international sales and a robust balance sheet.
Zacks Rank & Key Picks
Raytheon currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same sector are Boeing BA , Huntington Ingalls HII and Spirit Aerosystems SPR , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Boeing recorded an average positive earnings surprise of 20.69% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings increased 27% to $14.05 in the last 90 days.
Huntington Ingalls recorded an average positive earnings surprise of 3.85% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings rose 43.75% to $17.38 in the last 90 days.
Spirit Aerosystems has an average positive earnings surprise of 9.76% for the last four quarters. The Zacks Consensus Estimate for 2018 earnings rose 14.96% to $6.30 in the last 90 days.
The Hottest Tech Mega-Trend of Al l
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.