Major defense contractor Raytheon Company (RTN) won a major part of the $375 million Department of Defense (DoD) contracts awarded on Jul 8, 2013. The company has been awarded a cost-plus-incentive-fee contract with a value of $279.4 million for the development of a new electronic jammer for the U.S. Navy.
This contract for the technology development (TD) phase of the Next Generation Jammer (NGJ) will replace the ALQ-99 tactical jamming system used on the U.S. Navy EA-18G Growler electronic-attack aircraft manufactured by The Boeing Company (BA). Under the TD phase, Raytheon's work would include the building of critical technologies and design for the initial block of the NGJ.
The main purpose behind this 22-month technology development phase contract, which runs through May 2015, is to make enemy radars useless with the help of the jamming pods. This new jammer will be vital for future battle missions and is expected to be ready for use by fiscal 2020.
Upon successful completion of the TD phase, a 4-1/2-year engineering and manufacturing phase will follow. During this phase, the pods developed by Raytheon will be flight tested on Boeing's warplanes.
The latest contract is a significant win for Raytheon. The TD phase follows a 33-month technology maturation period in which four companies developed and matured several critical technologies key to the NGJ program. Apart from Raytheon, the other contractors were BAE Systems plc (BAESY), ITT Exelis and Northrop Grumman Corp. (NOC).
Raytheon is one of the best-positioned companies among the large-cap defense players due to its non-platform-centric focus. This insulates the company from program specific risk related to cancellation or deferral of any specific program.
Recently, Raytheon entered into an agreement with the U.S. Naval Air Systems Command for the manufacture of an integrated multi-intelligence (Multi-INT) system to protect warfighters at the forefront. The company's Intelligence, Information an! d Services business will be responsible for this program.
Raytheon won another contract, worth $126 million, from the DoD for the procurement of material needed to manufacture up to 29 Standard Missile-3 Block IB missiles. Also, it received a sizeable $534.8 million firm-fixed-price contract for the production of Advanced Medium-Range Air-to-Air Missiles for the U.S. Air Force and the militaries of Oman and Saudi Arabia.
Raytheon is flooded with a number of contracts from several government establishments. The company has a total backlog of $33.5 billion at the end of first-quarter 2013. However, 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 keep us concerned.
Raytheon holds a Zacks Rank #3 (Hold).
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