My stock pick this week is Raytheon (NYSE:RTN). Maybe the stock price will fly like a rocket. According to Zacks Investment Research, Raytheon recently received a contract, worth $42 million, for the initial concept development and program planning for the Standard Missile-3 (SM-3) Block IIB. The SM-3 Block IIB is the Missile Defense Agency's next-generation Aegis missile. Some of its main competitors are Boeing and Northrop Grumman. Raytheon’s current trailing PE ratio is about 10, and offers a 3.5% dividend. Its PEG ratio is 1.19, Price/Sale 0.69, and Price/Book 1.78.
New Missile Defense System
The SM-3 is being developed as part of the Missile Defense Agency's sea-based Aegis Ballistic Missile Defense System. It has successfully defeated 18 incoming ballistic missile threats in realistic test scenarios. Standard Missile technology has evolved to keep pace with ever more critical threats and grow into new missions. It was initially developed as a replacement for the Terrier, Talos and Tartar surface-to-air missiles.
Cost Effective Defense Contractor
Raytheon is the lowest-risk, lowest-cost, most-technically capable provider of missile defense solutions. As a part of its contract with the Missile Defense Agency, Raytheon has already delivered more than 130 SM-3s ahead of schedule.
Projected Future Growth
Raytheon enjoys strong order bookings and order backlog, an improving balance sheet, growing cash flow, and operational improvements. Future growth will be driven by its focus on Intelligence, Surveillance and Reconnaissance unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD programs.
Short-Term Buy/Long-Term Neutral
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. Thus in the absence of any positive triggers, we advise a long-term neutral rating. The company presently retains a short-term Zacks #2 Rank (Buy).
Buy Long Raytheon – Ticker RTN
Buy Entry: 47.52 to 49.04
Take Profit Areas: 52.54 to 53.04, 53.57 to 54.07, 56.16 to 56.72
Raytheon Company Profile
Raytheon Company, together with its subsidiaries, provides electronics, mission systems integration, and other capabilities in the areas of sensing, effects, and command, control, communications, and intelligence systems, as well as mission support services in the United States and internationally. It operates in six segments: Integrated Defense Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne Systems, and Technical Services. The Integrated Defense Systems segment provides integrated naval, air, and missile defense and civil security response solutions. The Intelligence and Information Systems segment provides intelligence and information solutions specializing in ground processing, unmanned ground systems, cybersecurity solutions, homeland/civil security, and other markets. The Missile Systems segment develops and produces weapon systems, including missiles, smart munitions, close in weapons systems, projectiles, kinetic kill vehicles, and directed energy effectors for the armed forces of the U.S. and other allied nations.
The Network Centric Systems segment provides net-centric mission solutions for the U.S. Army, Air Force, Navy and Marine Corps, and other government customers, as well as civil customers. The Space and Airborne Systems segment designs and develops integrated systems and solutions for missions, including intelligence, surveillance, and reconnaissance; precision engagement; unmanned aerial operations; and space. The Technical Services segment provides training, logistics, engineering, product support, and operational support services for the mission support, homeland security, space, civil aviation, counterproliferation, and counterterrorism markets. The company was founded in 1922 and is based in Waltham, Massachusetts.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RTN over the next 72 hours.