Raytheon Wins $33M Deal To Support Dual Band Decoy Program

Raytheon Company (NYSE:RTN) recently secured a $32.9-million contract for conducting a demonstration of existing technologies (DET) to support the Dual Band Decoy Program. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Work related to the deal will get executed in Goleta, CA, and is scheduled to get completed by September 2021. Raytheon will utilize fiscal 2019 research, development, test and evaluation (Navy) funds for completing this task.

A Brief Note on the Dual Band Decoy Program

The Dual Band Decoy Program comprises Raytheon’s ALE-50 program and BAE Systems’ (OTC:BAESY) AN/ALE-55 fiber-optic towed decoy. ALE-50 demonstrates a highly successful multi-service approach to ECM system commonality. It is an anti-missile countermeasures decoy system, which is deployed for protecting an aircraft and its crew against RF-guided missiles by luring the missile toward the decoy and away from the intended target.

The AN/ALE-55 fiber-optic towed decoy is a radio frequency self-protection unit that can be used in any aircraft, such as fighter jets, bombers and transports, specifically designed to protect an aircraft from radar guided missiles. It provides three layers of defensive jamming against a radar-based threat — preventing radars from tracking, breaking radar locks and acting as a target for incoming missiles.

What Favors Raytheon?

In recent times, many developing nations have been shifting their focus toward the modernization and technical advancement of new generation military radars, due to the rising threat of ballistic missiles. Such developments are likely to increase the global demand for different military radar programs. Inevitably, this will boost growth prospects of missile manufacturers like Raytheon.

In line with this, Markets and Markets research firm expects the military radar market to witness significant growth over the 2017-2022 period. Notably, this market is projected to witness a CAGR of 3.38% to reach $15.42 billion by 2022. Going forward, we expect Raytheon to benefit significantly from such projections, being a prominent radar systems provider.

Interestingly, the latest contract win will also enable Raytheon to conduct the DET, which will expand the existing capabilities of the Integrated Defensive Electronic Countermeasures used in Boeing’s F/A-18E/F aircraft. As demand for F/A-18 aircraft continues to soar, demand for Raytheon’s towed decoy systems and other radar programs will also gradually increase to make these combat proven aircraft even more powerful.

Price Performance

Shares of the company have gained 7.6% in the past six months compared with the industry’s growth of 22.2%.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the same sector are Northrop Grumman Corp. (NYSE:NOC) and Leidos Holdings (NYSE:LDOS) , each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Northrop Grumman came up with an average positive earnings surprise of 18.50% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has increased 2.26% to $19.42 in the past 60 days.

Leidos Holdings came up with an average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.54% to $4.60 in the past 60 days.

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