Defense prime Raytheon Company (RTN) has been awarded a follow-on $42.9 million delivery order for 57 Common Sensor Payload electro-optical and infrared sensor systems. The order is part of the contract awarded by the U.S. Army in November 2007, with potential future follow-on contracts worth up to $1.2 billion.
The systems will be deployed to support U.S. troops engaged in Operation Enduring Freedom and Operation Iraqi Freedom for maintaining peace and order in civilian areas. The sensor will help security forces on the ground to recognize threats early and respond promptly and accurately.
Raytheon Intelligence and Information Systems segment (IIS) subsequent to winning the contract in 2007, has delivered 28 system development and demonstration units to the U.S. Army.
Raytheon IIS segment headquartered in Garland, Texas, is a leading provider of intelligence and information solutions specializing in ground processing, unmanned ground systems, cyber-security solutions, homeland-civil security and other markets. Key customers include the U.S. Intelligence Community, U.S. Department of Defense (DoD) agencies, the Federal Bureau of Investigations (FBI), the National Oceanographic and Atmospheric Association (NOAA), and the United Kingdom Home Office.
Based in Waltham, Massachusetts, Raytheon Company, along with its subsidiaries, provides electronics, mission systems integration, apart from other capabilities in the areas of sensing, effects, command, control, communications and intelligence systems, as well as mission support services to its global customers.
Raytheon is one of the best-positioned companies among the large-cap defense players due to its non-platform-centric focus, strong order bookings and order backlog of $35.7 billion at the end of the third quarter 2010. Revenue and earnings growth continue to be driven by a strong presence in the current focus areas of Intelligence, Surveillance and Reconnaissance; missile defense; border security; training and mission support; and cyber security.
On the near-term horizon, the delay in the passing of fiscal 2011 defense budget raises some doubts about the expected level of growth. The Obama Administration is asking for $548.9 billion for the Department of Defense Base Budget in 2011, $15 billion more than the $533.7 billion Department of Defense Base Budget for 2010. However, until the U.S. Congress actually passes the bill, there remains enough reason to keep defense companies in general and Raytheon in particular perturbed.
Raytheon currently retains a Zacks #3 Rank (short-term Hold rating) in line with its closest peers L-3 Communications Holdings Inc. (LLL) and Herley Industries Inc. (HRLY). We presently maintain a Neutral rating on the stock.
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