Raytheon (RTN) Secures Aegis Radar Transmitter Contract

Raytheon Co.’s (NYSE:RTN) Integrated Defense Systems division has won a contract from the U.S. Navy for the production of Aegis Weapon System AN/SPY-1D(V) Radar Transmitter Group, Missile Fire Control System MK 99 equipment, and associated engineering services. The contract is valued at $365.8 million.

This contract has options which, if exercised, will bring the total contract value to $423 million. The contract falls under the Foreign Military Sales program that includes purchases for South Korea and Japan apart from purchases for the U.S. Navy. Work under this contract is expected to be completed by Oct 2022.

The SPY-1D(V) Transmitter and the MK 99 Fire Control System are an essential part of the Navy's Aegis missile defense system. Over the past 35 years, these systems have been in continuous production and are in use aboard 108 warships worldwide, comprising 17 ships sailed by foreign nations.

The SPY-1D(V) is a high-powered radar transmitter that supports search, track and missile guidance functions, while the MK99 system communicates with the mission control station to identify and illuminate air targets.

Raytheon is one of the best-positioned, large-cap defense players and will continue to gain traction on the back of its strong fundamentals, focus on technological innovation and improvement of its product offering, which will ensure more contract wins and an enhanced growth trajectory.

The company has been enjoying a steady stream of contracts from several government establishments. As a result, total backlog at the end of the first quarter of 2016 was $34.8 billion, up from $32.5 billion at the end of the year-ago quarter.

Raytheon currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space include BAE Systems (LON:BAES) plc (OTC:BAESY) , CAE Inc. (TO:CAE) and Esterline Technologies Corp. (NYSE:ESL) , each carrying a Zacks Rank #2 (Buy).

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