Raytheon Wins $149M Navy Deal For Developing SM-2 Block IIIC

Raytheon Company’s (NYSE:RTN) Missile Systems (MS) business unit recently secured a $149.4-million contract for the engineering and development of Standard Missile-2 Block IIIC. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Work related to the deal will be executed in Tucson, AZ; and various other locations across the country. The work is expected to get completed by October 2022.

Raytheon’s SM-2 Block IIIC Specifics

The Standard Missile-2 (SM-2) Block IIIC is the newest missile variant that features an active radar seeker. The upgrade of the SM-2 Block IIIC missile is expected to fix the shortfalls featured in all of the previous SM-2 missiles that relied on semi-active radar seekers, making the Aegis weapon system highly vulnerable to saturation attacks. The newest variant will be even more effective in providing superior anti-air warfare and advanced anti-surface warfare capabilities against advanced anti-ship missiles and aircraft.

What Favors Raytheon?

In recent times, missile defense has steadily emerged to play a pivotal role in a nation’s defense strategy, due to increasing geo-political tensions across the globe. To this end, Raytheon, a prominent U.S. missile-maker, has been clinching frequent awards from the United States as well as international customers, courtesy of its high-end, combat-proven missiles.

Inevitably, the company’s growth prospects and the rate at which it acquires major contracts will always be on a rise, owing to the technical advancements and various upgrades Raytheon introduces.

Notably, the company’s MS division recorded third-quarter 2018 net sales of $2,082 million, reflecting a 7% improvement from the year-ago quarter. Considering this, we may expect the latest deal to instill further growth in this segment.

Per the Markets and Markets research firm, the rocket and missile market is projected to see a CAGR of 4.74%, from $55.5 billion in 2017 to $70 billion by 2022. This, in turn, should boost Raytheon’s growth prospects, going ahead.

Price Movement

Raytheon’s stock has lost 10% in the past 12 months, against the industry’s growth of 0.8%. The underperformance may have been caused due to tough competition the company faces in the aerospace and defense market.

Zacks Rank & Other Stocks to Consider

Raytheon currently carries a Zacks Rank #2 (Buy).

A few top-ranked companies in the same sector are Aerojet Rocketdyne Holdings (NYSE:AJRD) , Teledyne Technologies Inc. (NYSE:TDY) and The Boeing Company (NYSE:BA) .

While Aerojet Rocketdyne and Teledyne Technologies sport a Zacks Rank #1 (Strong Buy), Boeing carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 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 2018 earnings has increased 6% to $8.75 in the past 90 days.

Boeing delivered average positive earnings surprise of 28.01% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 3% to $15.05 in the past 90 days.

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