Raytheon Wins $94M Army Deal For Excalibur 155mm Projectiles

Raytheon Company’s (NYSE:RTN) Missile Systems (MS) business unit recently won a $93.7 million modification contract for Excalibur 155mm projectiles. The contract was awarded by the U.S. Army Contracting Command, NJ.

Details of the Deal

Work related to the deal will be performed in Karlskoga, Sweden; South Plymouth and Glenrothes, the United Kingdom; and various locations across the United States.

The agreement is expected to get completed by Sep 30, 2020. Raytheon will utilize fiscal 2018 other procurement (Army) funds for completing the task.

Benefits of Excalibur 155mm Projectiles

Raytheon's Excalibur projectile is an extended range guided artillery shell that accurately extends the reach of .39-caliber artillery to 40 km and .52-caliber artillery to more than 50 km. Its overall precision, coupled with the ability to be integrated on multiple gun systems, enables both the U.S. and its coalition partners provide overmatch capabilities against land targets in a variety of combat environments, including stationary land targets.

Raytheon is currently developing a laser-guided version of the projectile, the Excalibur S, which incorporates a digital semi-active laser seeker, allowing it to strike moving targets without accurate location information. Further, it reduces the risk associated with GPS jamming.

Due to the variety of advantages it possesses, nations like Sweden, Canada, Australia and the Netherlands have already chosen the Excalibur precision-guided projectile to address vital security interests, while several other international militaries are finalizing procurement plans.

What’s Favoring Raytheon?

Increasing geo-political tensions across the globe have prompted nations to strengthen their defense systems manifold. With rapid technological development, missile defense has steadily emerged to play a pivotal role in a nation’s defense strategy.

To this end, Raytheon’s advanced MS segment has been clinching significant awards from the United States as well as international customers, courtesy of its high-end, combat-proven arsenals. The latest contract win is evidence to that.

Notably, the MS division recorded first-quarter 2018 net sales of $1,848 million, reflecting a 5% improvement from the year-ago quarter. We may expect the aforementioned contract to instill further growth in this segment, going ahead.

Moreover, Raytheon benefited from the fiscal 2018 appropriations bill that witnessed an increase of $150 million for its Excalibur program. In relation to this increased spending provisions, the company expects to acquire more bookings in 2018 and a favorable sales growth in 2019 and beyond.

Price Movement

Raytheon’s stock has improved about 22.7% in the last twelve months compared with the broader industry’s growth of 25.1%. The underperformance may have been caused due to tough competition in the
market and political uncertainties.

Zacks Rank & Key Picks

Raytheon currently holds a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space are Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) , KLX Inc. (NASDAQ:KLXI) and CPI Aerostructures, Inc. (NYSE:CVU) .

While Kratos Defense & Security Solutions sports a Zacks Rank #1 (Strong Buy), KLX and CPI Aerostructures carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kratos Defense & Security Solutions delivered an average positive earnings surprise of 9.52% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 11.8% to 19 cents in the
last 90 days.

KLX came up with an average positive earnings surprise of 10.57% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 4% to $4.42 in the last 90 days.

CPI Aerostructures delieverd an average positive earnings surprise of 20.08% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 21.1% to 86 cents in the last 90 days.

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