Raytheon Wins $17M Navy Deal To Support Standard Missile-2

Raytheon Company’s (NYSE:RTN) Missile Systems (MS) business division recently secured a $17-million modification contract for supporting the Standard Missile-2 (SM-2) with Zumwalt capability and design agent. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Majority of the work related to the deal will be executed in Tucson, AZ, and Andover, MA. The entire task is expected to get completed by March 2022.

Advantages of the Standard Missile-2

The SM-2 system provides superior anti-air warfare and limited anti-surface warfare capabilities against advanced anti-ship missiles and aircraft. The missile is lethal against subsonic, supersonic, high-maneuvering, anti-ship cruise missile fighters, bombers and helicopters in an advanced electronic countermeasures environment.

Its upgraded Block IIIC is the newest variant that features an active radar seeker, and is designed to 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 for a nation’s defense strategy, due to the 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 and international customers, courtesy of its high-end, combat-proven missiles.

Inevitably, Raytheon’s growth prospects are expected to rise, owing to the technological advancements and services the company offers in missile defense. 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.

Interestingly, 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 18.7% in the past 12 months, wider than the industry’s decline of 5.3%. The underperformance may have been caused by the tough competition the company faces in the defense market.

Zacks Rank & Other Stocks to Consider

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

A few better-ranked companies in the same sector are Aerojet Rocketdyne Holdings (NYSE:AJRD) , Teledyne Technologies Inc. (NYSE:TDY) and Lockheed Martin Corp. (NYSE:LMT) .

While Aerojet Rocketdyne and Teledyne Technologies sport a Zacks Rank #1 (Strong Buy), Lockheed Martin 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.

Lockheed Martin delivered average positive earnings surprise of 13.92% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 2.9% to $17.51 in the past 90 days.

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