Raytheon Company (RTN) was awarded a $96.7 million follow-on U.S. Air Force contract for Miniature Air Launched Decoys (MALD). Raytheon till date has delivered more than 100 units of MALD to the U.S. Air Force.
The order is the third production lot of MALD made by Raytheon for the U.S. Air Force. This new contract calls for the company to build approximately 300 units of MALD – almost equaling the earlier two production lots.
MALD is a state-of-the-art, low-cost, decoy flight vehicle that is modular, air-launched and programmable. It weighs less than 300 pounds and has a range of approximately 500 nautical miles.
Raytheon is one of the largest aerospace and defense companies in the U.S. It boasts of a well-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’s order backlog is quite diversified, consisting of more than 15,000 contracts. Its largest contract in fiscal 2009 was the Zumwalt Class Destroyer (DDG 1000) program, which accounted for less than 5% of total net sales in 2009. A diversified revenue base greatly insulates its performance from cancellation, curtailment or deferment of a program. Raytheon ended the first quarter of 2010 with a backlog of approximately $37 billion compared with $36.9 billion at the end of fiscal 2009.
Raytheon is also focused on increasing shareholder value through incremental dividend, and ongoing share repurchases. In the first quarter of 2010 the company repurchased 5.5 million shares of its common stock for $300 million. Earlier in March 2010, it increased its annual dividend payout rate by 21% from $1.24 to $1.50 per share.
Raytheon expects its fiscal 2010 revenue in the range of $25.9 billion – $26.4 billion. EPS for fiscal 2010 is forecasted in the range of $4.75 – $4.90. However this is below the Zacks Consensus EPS Estimate of $5.00 for fiscal 2010.
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. Defense contractors with significant exposure to high-cost platform programs include Lockheed Martin Corporation (LMT), Northrop Grumman Corporation (NOC), and General Dynamics Corporation (GD).
However in the near-term we do not expect any upside since we feel all these positives have been factored in the current market price of the stock. Thus we maintain our market neutral recommendation on the Zacks #3 (hold) stock.
Read the full analyst report on “RTN”
Read the full analyst report on “LMT”
Read the full analyst report on “NOC”
Read the full analyst report on “GD”
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