Raytheon Unit to Maintain North Warning System - Analyst Blog

Aerospace and defense major Raytheon Co. RTN announced that its unit  Raytheon Canada Limited has been awarded a contract by Public Works and Government Services Canada for operations and maintenance of the North Warning System (“NWS”). The initial duration of the contract is five years with two options that could extend it by another five years.

The North Warning System is a joint Canadian and United States radar system, which is used to detect airborne threats across North America's polar region. Technical expertise and proficiency in communications and intelligence systems have helped Raytheon to win this contract. Raytheon Canada Limited also roped in Canadian Base Operations, Inc. while bidding for this defense contract.

Per the contract, Raytheon will control and maintain 47 radar sites, 5 logistics support sites, a monitoring and control center and a radar depot. These systems jointly provide continuous surveillance of airborne threats across the North American polar airspace. This makes the coordination and 24x7 running of these systems absolutely essential.

FMS or the shorthand for foreign military sales contributes a sizeable portion of Raytheon's total revenues. Though the company did not provide the value of the present contract, it expects FMS to touch 30% of total revenues in 2014, exceeding the 27% in 2013.

Raytheon's diversified portfolio allows it to win regular contracts both in the U.S. and across the world. The company exited the first quarter of 2014 with a backlog of $4.3 billion versus $3.6 billion in the year-ago period.

Raytheon currently has a Zacks Rank #3 (Hold). Investors interested in the aerospace and defense industry may consider stocks like The Boeing Co. BA, Embraer SA ERJ and Alliant Techsystems Inc. ATK.  All these stocks carry a Zacks Rank #2 (Buy).