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Raytheon Wins $255M DoD Contract for Lyndon B. Johnson

Zacks Equity Research
Updated

Raytheon Company RTN won a $255.3 million modification contract from the U.S. Navy to procure mission system equipment for its upcoming USS Lyndon B. Johnson. The contract was awarded by the Naval Sea Systems Command, WA.

The contract will use fiscal 2015 and 2016 shipbuilding and conversion (Navy) funding. It includes options which could take the cumulative value to $349.2 million, if exercised.

Work is scheduled to be completed by Oct 2019. The company will carry out 40% of the work in Portsmouth, RI and the rest in Andover, MD; Marlboro, MA; Charlottesville, VA; McKinney, TX; Moorestown, NJ; and Ontario, Canada.

USS Lyndon B. Johnson is the third and final ship of the Zumwalt-class destroyer. Originally, 32 the Zumwalt-class ships were planned, which was later reduced to 3 units. Lyndon B. Johnson is a multi-mission ship that is meant specifically for land attack and littoral warfare. It features the tumblehome hull form, similar to ironclad warships. In Sep 2015, Defense of Department officials were considering a termination of the funding for Lyndon B. Johnson. By Dec 2015, however, the Pentagon decided to keep supporting the ship.

Raytheon is one of the best-positioned large-cap defense players due to its platform and non-platform-centric focus. Its order bookings and order backlog amounted to $33.5 billion at the end of the third quarter of 2015.

Revenue and earnings growth continue to be driven by a strong presence in the areas of Intelligence, Surveillance and Reconnaissance (“ISR”); air & missile defense systems; border security; air traffic management; training and homeland security; and cyber security. Its non-platform centric focus also insulates it from cancellation or deferral of any specific platform programs.

Looking forward, the company enjoys strong order bookings and order backlog, an improving balance sheet and growing cash flow. Future growth will be driven by its focus on ISR unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD.

Zacks Rank

Raytheon currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the aerospace and defense equipment industry are TransDigm Group Incorporated TDG, AeroVironment, Inc. AVAV and HEICO Corporation HEI, each carrying a Zacks Rank #2 (Buy).

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RAYTHEON CO (RTN): Free Stock Analysis Report
 
TRANSDIGM GROUP (TDG): Free Stock Analysis Report
 
AEROVIRONMENT (AVAV): Free Stock Analysis Report
 
HEICO CORP (HEI): Free Stock Analysis Report
 
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