Raytheon Missile Contract Extended

Dec.10.09 | About: Raytheon Company (RTN)

Raytheon Co. (NYSE:RTN) bagged a $160 million contract for continued development work on the Block IIA Standard Missile 3 for the Pentagon's Missile Defense Agency. The award extends Raytheon's original contract for work on the missile program by 10 months to Aug 31, 2010.

Standard Missile-3 is a ship based anti-ballistic missile being developed by the Missile Defense Agency’s Ballistic Missile Defense System (BMDS). The Block IIA version will have a larger kill radius compared to its predecessors. The contract will boost the backlog of the Raytheon Integrated Defense Systems segment. In the recently reported quarter, segmental backlog was stagnant at $9.8 billion, compared to $9.9 billion as of year-end fiscal 2008.

Raytheon is the 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.

We continue to view Raytheon as one of the best positioned among the large-cap defense primes due to its non-platform-centric focus, strong order bookings and order backlog, strong cash flow generation, and focus on shareholder value. We maintain our market Neutral recommendation on the shares. Defense contractors with significant exposure to high-cost platform programs include Lockheed Martin (LMT - Analyst Report), Northrop Grumman Corp. (NOC - Analyst Report), and General Dynamics Corp. (GD - Analyst Report).