Raytheon Secures $200M Deal For MK 15 Close-In Weapon System

Raytheon Company’s (NYSE:RTN) Missile System unit recently secured a $199.6-million contract to provide upgrades and conversions, system overhauls and associated hardware related to the MK 15 Close-In Weapon System (CIWS). The contract was awarded by the Naval Sea Systems Command, Washington, DC.

Work related to the deal will be performed in Tucson, AZ, and Louisville, KS. The work is scheduled to be completed by October 2023. This contract combines 85% of the purchases for the U.S. government, 8% for the Kingdom of Saudi Arabia and 7% for the United Kingdom (7%) under the Foreign Military Sales (FMS) program.

Significance of the MK 15 CIWS

Raytheon’s MK 15 Phalanx CIWS is a fast-reaction, rapid-fire, 20-millimeter, terminal defense gun system, which has been designed to engage anti-ship cruise missiles and fixed-wing aircraft at short range. It provides ships of the U.S. Navy with an inner layer point defense capability against anti-ship missiles (ASM), aircraft and littoral warfare threats that can infiltrate other fleet defenses.

What Favors Raytheon?

Increasing geopolitical tensions across the globe have prompted nations to strengthen their defense systems manifold, especially missile defense systems. To reap benefits of this situation, Raytheon has already begun to work on modernization programs for its MK 15 CIWS. As the company is the only source that can provide the MK 15 CIWS to the U.S. Navy, Army and Coast Guard, procurement of contracts like the recent one are likely to significantly drive its overall revenues.

Furthermore, the fiscal 2020 defense budget has provisioned for major warfighting investments of $13.6 billion for missile defense. This should enable Raytheon to clinch more contracts related to missile defense systems and associated services, and thereby boost its profit margin, going ahead.

Price Performance

Shares of the company have lost 4.9% in the past six months against the industry’s growth of 8.6%.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the same space are Aerojet Rocketdyne Holdings (NYSE:AJRD) , Teledyne Technologies Incorporated (NYSE:TDY) and Transdigm Group Incorporated (NYSE:TDG) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with average positive earnings surprise of 25.46% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 13.8% to $1.90 in the past 90 days.

Teledyne Technologies pulled off average positive earnings surprise of 9.26% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 6.42% north to $9.95 in the past 90 days.

Transdigm Group came up with average positive earnings surprise of 10.71% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 5.8% to $17.99 in the past 90 days.

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