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Raytheon Wins $25M Deal to Review Tomahawk Missiles Design

Zacks Equity Research

Raytheon Company’s RTN Missile Systems unit recently secured a $25.5-million contract for the critical design review of the Tomahawk Missiles Military Code. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Per the deal terms, Raytheon’s review will include analysis, development, integration, and test of hardware and software solutions. Work related to the deal will be executed in El Segundo, CA, and Tucson, AZ, and is scheduled to get completed by March 2021.

Advantages of the Tomahawk Cruise Missile

Raytheon's Tomahawk subsonic cruise missile is used for deep land attack warfare, designed to fly at extremely low altitudes at high subsonic speeds and piloted over an evasive route by several mission-tailored guidance systems. The Naval Strike Missile is a long-range, precision strike weapon that can find and destroy ships at distances up to 100 nautical miles away. A major improvement to the Tomahawk is network-centric warfare capabilities, using data from multiple sensors such as aircraft, UAVs, satellites, foot soldiers, tanks and ships to find its target. It will also be able to send data from its sensors to these platforms.

Raytheon also plans on adding navigation and communication upgrades to all Tomahawk Block IV missile variants to extend their service life by another 15 years.

What Favors Raytheon?

Increasing geopolitical tensions across the globe have prompted nations to strengthen their defense systems manifold, especially missile defense systems. To reap the benefits of this situation, Raytheon has started focusing on the modernization of its Tomahawk Missiles.

Going forward, Tomahawk missiles will be upgraded with enhanced maritime strike capabilities. Moreover, these missiles are already integrated with the vertical launch system (VLS) for U.S. Navy ships, without any costly delays. Such upgrades are expected to drive demand for these missiles and other associated services globally. This, in turn, is projected to usher in more contracts for the company, like the latest one.

Interestingly, the fiscal 2020 U.S. defense budget includes a spending plan of $13.6 billion for varied missile defense programs. The aforementioned developments along with the favorable budget allocation are expected to benefit various missile makers like Raytheon.

Price Performance

Shares of the company have gained 9.4% in the past three months compared with the industry’s growth of 7.9%.


Zacks Rank & Key Picks    

Raytheon currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same space are Aerojet Rocketdyne Holdings AJRD, Teledyne Technologies Incorporated TDY and Transdigm Group Incorporated TDG, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aerojet Rocketdyne came up with average positive earnings surprise of 25.46% in the last four quarters. The company’s long-term growth estimates currently stand at 5.5%.

Teledyne Technologies pulled off average positive earnings surprise of 9.26% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has moved 6.4% north to $9.95 over the past 90 days.

Transdigm Group delivered average positive earnings surprise of 10.71% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 6.82% to $18.17 over the past 90 days.

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