Raytheon Wins $72M Modification Contract For DDG 1000 Ship

Raytheon Company’s (NYSE:RTN) Integrated Defense Systems (“IDS”) business division recently secured a $72.1-million modification to previously-awarded contract N00024-17-C-5145 for exercising options regarding DDG 1000 ship class integrated logistics support and engineering services. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Work related to the deal will be executed in Portsmouth, RI (40%); San Diego, CA (28%); Tewksbury, MA (24%); Marlboro, MA (2%); Ft. Wayne, IN (2%); Bath, ME (2%); St. Petersburg, FL (1%) and Nashua, NH (1%), and is expected to be completed by September 2019.

A Brief Note on DDG 1000

Raytheon's DDG 1000 destroyer ship is designed with the sailor in mind. The Zumwalt-class destroyers are America’s next generation combat ships. The vessel is easier to operate because of its automation, requiring fewer crew members. Cutting-edge technologies facilitate DDG 1000’s advanced capabilities, providing the ship with unmatched versatility and dramatically reducing its manning requirements.

The ship's technology also better protects sailors serving on board from the destroyer. The ship's sleek, stealthy lines camouflage the DDG 1000 on enemy radars as a small fishing boat. The Zumwalt-class destroyers also incorporate Raytheon's Integrated Undersea Warfare sonar, a suite of sensors designed for anti-submarine warfare and torpedo defense.

What Favors Raytheon?

Increasing geo-political tensions across the globe have prompted nations to strengthen respective defense arsenal with technologically advanced naval combat, ship electronic and sensing systems. To this end, Raytheon’s advanced IDS segment has been clinching pivotal awards from the United States and international customers owing to its high-end, combat management systems.

Such contract wins have been fueling growth in the IDS division, which recorded third-quarter 2018 net sales of $1,493 million, up 7% from the year-ago period. Considering the latest contract win, we may project this segment to reflect similar revenue growth, going forward.

Price Movement

Raytheon’s stock has lost 21.8% in the past 12 months, wider than the industry’s decline of 9.5%.

Zacks Rank & Other Stocks to Consider

Raytheon currently carries a Zacks Rank #2 (Buy). A few other top-ranked companies in the same space are AeroVironment, Inc. (NASDAQ:AVAV) , Aerojet Rocketdyne Holdings Inc. (NYSE:AJRD) and Teledyne Technologies Incorporated (NYSE:TDY) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment delivered average positive surprise of 257.01% in the last four reported quarters. The Zacks Consensus Estimate for fiscal 2019 earnings has moved 13.2% north to $1.54 in the past 60 days.

Aerojet Rocketdyne came up with average earnings surprise of 19.27% in the trailing four reported quarters. The Zacks Consensus Estimate for 2018 earnings has been revised 43.3% upward to $1.82 in the past 60 days.

Teledyne Technologies pulled off average beat of 12.92% in the previous four reported quarters. The Zacks Consensus Estimate for 2018 earnings has been raised 6.1% to $8.75 in the past 60 days.

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