Raytheon Secures $205.2M Deal For Phalanx Weapon System

Raytheon Company’s (NYSE:RTN) Missile Systems (“MS”) unit recently won a contract to manufacture land-based Phalanx weapon system. Work related to the deal is scheduled to be completed by Dec. 27, 2023.

The contract, valued at $205.2 million, was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.

Significance of Phalanx Weapon System

The Phalanx weapon system is a rapid-fire, computer-controlled, radar-guided gun that can destroy anti-ship missiles and other close-in threats on land as well as sea. On land, as part of the U.S. Army’s counter-rocket, artillery and mortar systems, it detects and destroys incoming rounds. It also helps provide early warning of attacks.

Phalanx combines a proven 20 mm M61A1 Gatling gun, firing M-246 or M-940 self-destruct rounds at a selectable rate of 3,000 or 4,500 shots per minute. It also includes advanced search and track Ku-band radar featuring closed-loop spotting technology to provide autonomous target detection and engagement. It can be interfaced with a multitude of sensors and systems designed to provide an overarching protection umbrella of sites on the ground.

What Favors Raytheon?

Raytheon is one of the best-positioned large-cap defense players, courtesy of non-platform-centric focus. The company is heavily investing in technological upgrades that boosted growth. The company’s MS division recorded third-quarter 2018 net sales of $2,082 million, up 7% from the year-ago quarter’s tally. Moreover, the company witnessed an increase in its order backlog of 8.9% year over year to a new record backlog of approximately $41.6 billion in the third quarter of 2018.

In recent times, increasing geographical tensions has boosted the demand for missile defensesystems. In June 2018, the U.S. Senate approved the fiscal 2019 defense budget worth $717 billion, up 5% from the initial fiscal 2018 budget. We believe that Raytheon, being one of the prominent defense contractors, will benefit from the budget decision and similar contracts that will boost growth in the MS segment.

Other companies from the same space like Aerojet Rocketdyne Holdings (NYSE:AJRD) , AAR Corp. (NYSE:AIR) and AeroVironment, Inc. (NASDAQ:AVAV) are also expected to gain significantly from the upward budget revision.

Zacks Rank & Price Movement

Raytheon currently carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has declined 18.6% in the past 12 months, compared with the industry’s decline of 4.0%.

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