Raytheon Company’s RTN Integrated Defense Systems (IDS) business division recently secured a $123.5 million contract for the production of Fire control system (FCS) MK 99 equipment for fiscal 2020 Advanced Electronic Guidance and Instrumentation System (Aegis) Weapon System. The deal was awarded by the Naval Sea Systems Command, Washington, DC.
About the Deal
Per the terms of the agreement, the company will also offer Aegis modernization production requirements and associated engineering services to support DDG 51 Class Flight III destroyers and the Spanish navy’s F-110 program. This apart, Raytheon will manufacture Aegis BMD Kill Assessment Ordnance Alteration (ORDALT) Kits and Solid State Switch Assembly (SSSA) Special Test Equipment (STE).
Majority of work related to the deal will be executed in Andover, MA. The entire task is expected to be completed by April 2023.
A Brief Note on AEGIS and FCS MK 99
Aegis is an integrated missile guidance system used by the U.S. Navy and allied ships to shield the fleet against aircraft, cruise missiles and ballistic missiles. Simultaneously, it is also capable of launching attacks on land targets, submarines and surface ships.
The FCS MK-99 is a major component of the Aegis Combat System, which controls the loading, arming and launching of the selected weapon, and provides terminal guidance for Anti-aircraft warfare (AAW) missiles. FCS controls the continuous wave illuminating radar with a very high probability of kill. The MK-99 FCS also controls the target illumination for the terminal guidance of Ship Launched SM-2 Anti-Air Missiles.
What’s Favoring Raytheon?
Increasing geo-political tensions across the globe have prompted nations to strengthen their arsenal with technologically advanced missile defense systems.
Raytheon’s advanced IDS segment has been clinching pivotal contracts from the United States and overseas customers owing to its expertise in manufacturing high-end, missile defense systems. Furthermore, the company’s IDS segment benefits from providing product modernization requirements, engineering services and other technical assistance for the Aegis Combat System. Aegis system’s strong demand worldwide is an added positive for Raytheon.
Backed by the afore-mentioned developments, Raytheon’s IDS segment has been delivering impressive performances in recent times. In the third quarter of 2019, the business unit witnessed a solid top-line growth of 18% on a year-over-year basis.
In a year’s time, shares of Raytheon have gained 35% compared with the industry’s 42.5% rally.
Zacks Rank & Key Picks
Raytheon currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same space are Ducommun Incorporated DCO, CAE Inc. CAE and Teledyne Technologies Inc. TDY. While Ducommun sports a Zacks Rank #1 (Strong Buy), CAE Inc and Teledyne carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ducommun delivered a positive earnings surprise of 14.75% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings climbed 6.3% over the past 90 days.
CAE Inc. delivered a positive earnings surprise of 10.53% in the last reported quarter. It has a solid long-term earnings growth rate of 10%.
Teledyne delivered an average four-quarter earnings beat of 10.13%. The company currently boasts a solid long-term earnings growth rate of 7.5%.
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