Raytheon Company (RTN) has received a $52 million contract to make APG-79 Active Electronically Scanned Array (AESA) radars for Naval Air Systems Command’s F/A-18 Super Hornet tactical aircraft.
This is Raytheon’s third retrofit contract bringing the total orders for the update of block II F/A-18 to 57. The company will conduct operations for this program at its facilities in El Segundo, California; Andover, Massachusetts; Forest, Mississippi; and Dallas, Texas. Raytheon expects deliveries under the project to begin in October 2012.
The APG-79 AESA radar is designed to enhance the capabilities of the jets allowing crew members to detect and identify targets beyond the reach of most missiles. The radars’ long-range abilities give the crew ample time for accurate decision making. Additionally, these radars are extremely reliable and maintainable, with low failure and maintenance rates.
Based in Massachusetts, Raytheon 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.
Raytheon is slated to release its fourth quarter results of fiscal 2010 on January 24, 2011. The Zacks Consensus Estimate for the quarter is currently $1.15 per share, lower than the year-ago quarterly earnings of $1.29.
We continue to view Raytheon as one of the best positioned companies among the large-cap defense primes due to its non-platform-centric focus, strong order bookings and order backlog, healthy cash flow generation and focus on shareholder value. Its prime competitors are L-3 Communications Holdings Inc. (LLL), and Herley Industries Inc. (HRLY).
However in the near-term, we do not expect any upside since we feel all these positives have been factored into Raytheon’s current market price. Thus we maintain our ‘Neutral’ recommendation on the Zacks #3 Rank (Hold) stock.
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