Raytheon (RTN) Gets Go Ahead for $700M NORAD Contract

Raytheon Company RTN will finally proceed with a multi-year U.S. Air Force contract valued at $700 million, outwitting its opponent Littleton-based Lockheed Martin Space Systems, a unit of Lockheed Martin Corp. LMT.

The contract was initially awarded to Raytheon in Apr 2015. Lockheed Martin, who had held the contract since 2000, filed a protest with the U.S. Government Accountability Office. Finally, on Aug 25, the Government Accountability Office denied the protest while Raytheon won the operational support contract for NORAD's Cheyenne Mountain Complex, near Colorado Springs.

Raytheon will provide round-the-clock support and maintenance services to NORAD's Cheyenne Mountain Complex along with updating software systems covering warning and attack assessment systems for air, missile and space threats.

Raytheon has recently taken steps to ramp up its operations ensuring a successful transition of the contract. As part of the process, the company said that it is planning recruiting events in Colorado Springs and is acquiring and building out additional office space to accommodate the employees it plans to hire. The company has plans to eventually hire up to 700 employees in Colorado Springs by the end of 2016.

Based in Massachusetts, Raytheon Company is one of the largest aerospace and defense companies in the U.S. with a diversified line of military products, including missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems, naval systems, air traffic control systems, and technical services.

We note that Raytheon's Intelligence and Information Services ("IIS") segment has secured contracts worth over $2.5 billion to date. These include one from the NASA for managing the earth science data system, the Space launch range contract from the U.S. Air Force, and the current contract for a variety of support services from the North American Aerospace Defense Command (NORAD).

During the second quarter of 2015, IIS booked $387 million worth of contracts on domestic training programs and $151 million on foreign training programs in support of Warfighter FOCUS activities. The segment also booked $376 million on a number of classified contracts.

Although Raytheon currently holds a Zacks Rank #4 (Sell), the company's focus on technological upgrades will support overall industry-leading margin performance ahead.

A couple of better-ranked stocks in the industry are LMI Aerospace Inc. LMIA, sporting a Zacks Rank #1 (Strong Buy) and Spirit AeroSystems Holdings, Inc. SPR, carrying a Zacks Rank #2 (Buy).

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