Raytheon Wins 3 Contracts in a Row - Analyst Blog

On March 21, 2014, defense major Raytheon Co. RTN received three contracts from the U.S. Department of Defense for a combined value of over $70.0 million.

The highest value win was a $45.1 million contract (modification to a previous contract) for the production of one AN/SPY-1DV Transmitter Group and select Missile Fire Control System MK 99 equipment for the Aegis Ashore Missile Defense System in Poland. The contract is expected to be completed by March 2016.

Another win was worth $17.7 million for 19 Multi-Spectral Targeting Systems for the U.S. Navy MH-60R/S helicopters. The work is expected to be completed by March 2016 and to be performed in McKinney, Texas.

The third contract awarded to Raytheon was a 16-month-based system electronic contract for a fixed price of $7.4 million. The work on this contract is expected to be completed by July 31, 2015 and will be performed in Texas.

Despite the uncertainty surrounding the U.S. defense budget, Raytheon's diversified military products, its non-platform-centric focus and GaN technology have helped the company gain a mixture a small and big defense contracts.

Raytheon posted favorable fourth quarter earnings, surpassing the Street consensus. For the last four quarters the company came out with higher–than-expected earnings with an average surprise of approximately 19.7%.

The company has already received a host of contracts so far this year. The biggest win in recent times was a commercial sales contract worth $1.28 billion from the Sultanate of Oman for the National Advanced Surface-to-Air Missile System. We believe these contracts will help the company to achieve its 2014 sales guidance of $22.5–$23.0 billion.

With the gradual rectification in the global economy and a surge in aerospace demand, these defense majors are expected to witness stability in 2014 on the back of regular contract wins.

Raytheon currently holds a Zacks Rank #1 (Strong Buy). Other favorably ranked stocks include Huntington Ingalls Industries, Inc. HII, Wesco Aircraft Holdings, Inc. WAIR and Lockheed Martin Corp. LMT. While Huntington and Wesco Aircraft carry a Zacks Rank #1 (Strong Buy), Lockheed Martin holds a Zacks Rank #2 (Buy).