Raytheon Wins $17M Navy Deal To Support Standard Missile-2

 | Dec 28, 2018 05:23AM ET

Raytheon Company’s (NYSE:RTN) Missile Systems (MS) business division recently secured a $17-million modification contract for supporting the Standard Missile-2 (SM-2) with Zumwalt capability and design agent. The deal was awarded by the Naval Sea Systems Command, Washington, DC.

Majority of the work related to the deal will be executed in Tucson, AZ, and Andover, MA. The entire task is expected to get completed by March 2022.

Advantages of the Standard Missile-2

The SM-2 system provides superior anti-air warfare and limited anti-surface warfare capabilities against advanced anti-ship missiles and aircraft. The missile is lethal against subsonic, supersonic, high-maneuvering, anti-ship cruise missile fighters, bombers and helicopters in an advanced electronic countermeasures environment.

Its upgraded Block IIIC is the newest variant that features an active radar seeker, and is designed to be even more effective in providing superior anti-air warfare and advanced anti-surface warfare capabilities against advanced anti-ship missiles and aircraft.

What Favors Raytheon?

In recent times, missile defense has steadily emerged to play a pivotal role for a nation’s defense strategy, due to the increasing geo-political tensions across the globe. To this end, Raytheon, a prominent U.S. missile-maker, has been clinching frequent awards from the United States and international customers, courtesy of its high-end, combat-proven missiles.

Inevitably, Raytheon’s growth prospects are expected to rise, owing to the technological advancements and services the company offers in missile defense. Notably, the company’s MS division recorded third-quarter 2018 net sales of $2,082 million, reflecting a 7% improvement from the year-ago quarter. Considering this, we may expect the latest deal to instill further growth in this segment.

Interestingly, per the Markets and Markets research firm, the rocket and missile market is projected to see a CAGR of 4.74% from $55.5 billion in 2017 to $70 billion by 2022. This, in turn, should boost Raytheon’s growth prospects, going ahead.

Price Movement

Raytheon’s stock has lost 18.7% in the past 12 months, wider than the industry ’s decline of 5.3%. The underperformance may have been caused by the tough competition the company faces in the defense market.