Raytheon Technical Services Company LLC, a subsidiary of Raytheon Company (RTN) won the U.S. Army Operations, Planning, Training and Resource Support Services (OPTARSS) II contract. This five-year indefinite-delivery, indefinite-quantity, multiple-award task order contract has a ceiling value of $2.5 billion.
Raytheon under the contract will provide the U.S. Army with services that address operational planning; training; modeling and simulation; flight operations; mobilization plans and execution; deployment operations; force protection and transformation.
Raytheon is one of the best-positioned companies among the large-cap defense players because of its non-platform-centric focus. Looking forward, the company enjoys strong order bookings and order backlog, operational improvements and an above industry average ROE.
Raytheon’s strong balance sheet provides financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.
Raytheon recently in March 2011 raised its quarterly dividend by 15%, bringing its annualized dividend rate to $1.72 per share from the previous payout rate of $1.50 per share.
As a result the company will now pay a quarterly dividend of 43 cents per share to its shareholders, compared with $0.375 paid earlier. The increased quarterly dividend will be paid on April 28, 2011 to shareholders of record as on April 6, 2011.
Raytheon’s new annualized dividend rate reflects a current yield of 2.96%. This compares favorably with the current dividend yields of its closest peers – The Boeing Company (BA) with a yield of 2.29% and Northrop Grumman Corporation (NOC) with a yield of 2.77%.
This is, however, offset by apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
In January this year, Raytheon reported its fourth-quarter and fiscal 2010 results. The company ended 2010 with cash and cash equivalents of $3.6 billion versus the 2009 year-end level of $2.6 billion.
Long-term debt as of 2010-end was $3.6 billion, higher than the level of debt at the end of 2009. Cash from operations in 2010 was $1.9 billion, lower than $2.7 billion in the year-ago period.
Based in Massachusetts, Raytheon Company 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.
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