Raytheon Company (RTN) has received a contract worth $79.2 million from the U.S. Army to develop a system known as Accelerated Improved Intercept Initiative (“AI3”) that will detect and destroy incoming rockets aimed at troops. The demonstration for the system will be done over 18 months and is expected to be followed by a low rate initial production.
AI3 Battle Element consists of an interceptor developed by Raytheon and a government furnished launcher, fire control system, and command and control system. Per the contract, the company will develop and demonstrate the intercept of rockets in flight.
We believe that the company’s diversified revenue base greatly insulates its performance from cancellation, curtailment or deferment of a program. Moreover, it is one of the best-positioned companies with an improving balance sheet, growing cash flow and operational improvements.
In January this year, Raytheon Company reported fourth quarter and fiscal 2011 results. The company’s fourth-quarter adjusted earnings of $1.74 per share beat the Zacks Consensus Estimate by 40 cents. Results were also higher than the year-ago quarterly earnings of $1.55 per share.
These positives are, however, offset by apprehensions over future cutbacks of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations.
Like its peers, Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC), the company presently retains its short-term Zacks #3 Rank (Hold).
Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. The company provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing, effects, and command, control, communications and intelligence systems, as well as a broad range of mission support services.
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