Raytheon Wins Contract Worth $119M For Tomahawk Program

Raytheon Company (NYSE:RTN) has won a contract to support the Maritime Strike Tomahawk Program. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.

Details of the Contract

Per the $119 million contract, Raytheon will offer services related to analysis, trade studies, architecture, modeling, simulation development, evaluation, and prototyping activities. These services will integrate seeker suite technology and processing capabilities into the Tactical Tomahawk Block IV All-Up-Round missile system.

Work is scheduled to be completed by August 2029. While majority of the work will be executed in Tucson, AZ; the rest will be carried out in Dallas, TX; Boulder, CO; and various other locations within the United States and across the globe. The contract will use fiscal 2017 research, development, test and evaluation (Navy) funds for the same.

A Brief Note on Tomahawk Missile

Tomahawk missile has become an important weapon in the U.S. defense arsenal for its precise capability to take out high value target from a very long distance. These missiles have a range of 1,000 nautical miles (1,150 statute miles) and can be launched both from the surface as well as from submarines. Its latest version, Block IV, has a satellite link that enables the missile to hover over the battlefield as it awaits target instructions.

Why Raytheon?

With the increase in cyber-attacks, terrorism threats and geopolitical instability, there is an immediate need of all countries to elevate their level of security and defense. Therefore, major defense contractors in the nation like Raytheon, AeroVironment, Inc. (NASDAQ:AVAV) , Orbital ATK, Inc. (NYSE:OA) , Rockwell Collins, Inc. (NYSE:COL) are putting their best effort to make most of this opportunity and expand their business in the country.

Moreover, the recent cross-border missile brawl between the United States and North Korea has created increased opportunity for missile-makers like Raytheon to gain from the consequences. In fact, the recent tension, wherein North Korea fired a missile in Japan’s sea boosted the company’s share price by 2.2% on Aug 30.

Thanks to its next-generation missile systems, the company has been securing valuable contracts from the Pentagon, which in turn will significantly boost its revenue growth. In this regard, Raytheon recently won a modification contract worth $614.5 million for manufacturing 17 Standard Missile-3 (SM-3) Block IIA missiles. Per the deal, Raytheon will provide production and engineering support, obsolescence monitoring as well as technical baseline engineering support, and render quality assurance for the SM-3 Block IIA missiles. (Read more: Raytheon Wins $615M Deal for SM-3 Block IIA Missiles)

We believe the most recent deal, involving the Tomahawk Program, is another such awarding deal for the company and expect it to witness more such in days ahead.

Price Movement

Shares of Raytheon rallied about 30% in the last 12 months, outperforming the industry’s gain of 27.6%. This outperformance was driven by rising demand from the Middle East and North Africa region and growth in foreign military sales contracts.

Zacks Rank

Raytheon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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