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Raytheon Wins Navy Deal to Repair F/A-18 Jets Radar Systems

Zacks Equity Research

Raytheon Company RTN recently received a contract for the repair of the APG 65/73 radar systems to support the F/A-18 aircraft. Work related to the deal is scheduled to be over by March 2022.

Valued at $18.2 million, the contract was awarded by the Naval Supply Systems Command, Weapon Systems Support, Philadelphia, PA. The deal will be executed in Indianapolis, IN.

Importance of APG 65/73 radar

Raytheon’s APG-73 is an all-weather, coherent, multimode, multiwave form search-and-track sensor. It is an upgrade of the APG-65 that provides higher throughputs, greater memory capacity, improved reliability, and easier maintenance without associated increases in size or weight.

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An upgraded version of the APG series radars incorporates a motion-sensing subsystem with reconnaissance software, a stretch waveform generator module, and a special test equipment instrumentation and reconnaissance module. With these enhancements, the F/A-18 aircraft will have the hardware capability to make high-resolution radar ground maps comparable with those of the F-15E and the U-2 aircraft, enabling it to perform precision strike missions using advanced image correlation algorithms.

Raytheon & the Radar Market

Being a renowned radar manufacturer, Raytheon wins a steady flow of contracts involving its combat proven radar and sensor products. In 2019, Raytheon’s Space and Airborne Systems (SAS) unit was selected as a radar supplier for Boeing’s BA B-52 bomber radar modernization program, to develop and deliver a new active electronically scanned array (AESA) radar. In addition, the U.S. Marine Corps selected SAS’s APG-79(v)4 AESA radar for its F/A-18C/D classic Hornet fleet.

SAS was also awarded a contract by the U.S. Air Force to develop two prototype high-energy laser (HEL) counter-UAS for year-long overseas deployment.

Such notable contract wins reflect the dominant position that Raytheon enjoys in the radar market. The latest contract win is a testament to that.

Looking ahead, per a report by Research and Markets firm, the Global Electronically Scanned Arrays (ESA) market is expected to reach $12.39 billion by 2026, witnessing CAGR of 7.1% from 2018.

Such growth can be attributed to factors like increasing preference for technologically advanced radar for providing all-weather battlefield surveillance against incoming threat, integration of ESA into radar systems and replacement of traditional ESA systems. This, in turn, will further lead to robust demand for its spare parts, components and technical services, bolstering growth prospects of defense contractors like Raytheon in this market.

Price Movement

In the past one year, shares of Raytheon have lost 27% compared with the industry’s 26.8% decline.

Zacks Rank & Other Key Picks

Raytheon currently carries a Zacks Rank #3 (Hold).  A few better-ranked stocks in the same space are Transdigm Group Incorporated TDG and AeroVironment, Inc. AVAV, both of which carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AeroVironment delivered a four-quarter earnings beat of 5.72%, on average. It currently has a solid long-term earnings growth rate of 25%.

Transdigm delivered a four-quarter earnings beat of 10.67%, on average. It currently has a solid long-term earnings growth rate of 11.9%.

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The Boeing Company (BA) : Free Stock Analysis Report
 
Raytheon Company (RTN) : Free Stock Analysis Report
 
Transdigm Group Incorporated (TDG) : Free Stock Analysis Report
 
AeroVironment, Inc. (AVAV) : Free Stock Analysis Report
 
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