Raytheon to Provide Support Services to Radar Program Systems

Raytheon Company RTN recently secured a $50-million foreign military sales (FMS) contract related to Radar Restoration Program systems. The contract was awarded by the Naval Surface Warfare Center, Crane Division, Crane, IN.

Details of the Deal

Per the deal, Raytheon will provide radar antenna system overhauls, coatings, shipboard installations and incidental technical support services to Taiwan for its various Radar Restoration Program systems. These systems include the AN/SPS-48, AN/SPS-67(V)1, AN/SPS-67(V)3/5, AN/SPQ-9B, AN/SPS-77and others.

Majority of the work related to this deal will be performed in Odon, IN, and the remaining in Indianapolis, IN. The tasks are expected to get completed by March 2024. Raytheon will utilize fiscal 2019 operations and maintenance (Navy) funds to complete the tasks.

What’s Favoring Raytheon?

With the increase in cyber-attacks and terror threats worldwide, many nations across the globe have strongly shifted their focus on elevating the quality of cyber security and radar systems. Raytheon being the producer of a wide range of next-generation radar systems benefits heavily from such rising demands. This also helps the company solidify its position in the global radar systems market. Evidently, in 2018, the company made substantial investments in next-generation radars and radar-related technologies.

Raytheon's Integrated Defense Systems (IDS) segment, which manufactures military radar systems, witnessed a substantial rise in net sales during 2018 compared to that in 2017, primarily driven by activities on domestic and international tactical radar systems programs. To this end, it is imperative to mention that FMS contracts generated 30% of total sales in 2018 and continue to be a vital growth driver for Raytheon. We may expect the latest contract win to help the company witness similar trends in the days ahead.

Looking Ahead

Per Markets and Markets research firm, the global military radar systems market is expected to reach a value of $15.42 billion by 2022 at an estimated CAGR of 3.38%. This, in turn, will not only increase demand for various military radar systems, but also increase demand for the company’s sub-systems, products and technical services. As a result, Raytheon being a prominent radar manufacturer is most likely to benefit from such favorable projections, going forward.

Price Performance

Shares of Raytheon have plunged about 16.6% in a year compared with the industry’s decline of 4.4%.

Zacks Rank & Key Picks    

Raytheon currently carries Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are The Boeing Company BA, Spirit Aerosystems Holdings SPR and Heico Corporation HEI.

While Boeing and Spirit Aerosystems sport a Zacks Rank #1 (Strong Buy), Heico carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boeing came up with average positive earnings surprise of 17.08% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 11.3% to $20.13 in the past 90 days.

Spirit Aerosystems’ long-term growth estimates currently stand at 7.80%. The Zacks Consensus Estimate for 2019 earnings has risen 3.7% to $7.56 in the past 90 days.

Heico Corporation’s long-term growth estimates currently stand at 12.10%. The Zacks Consensus Estimate for 2019 earnings has risen 5.9% to $2.14 in the past 90 days.

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