Diversified aerospace and defense operator Raytheon Co. (RTN) announced that it received a missile contract worth $450 million from the U.S Air Force.

As per the contract, Raytheon will design, engineer as well as manufacture and develop a new precision strike missile. The new air-launched missile is designed to defeat moving and fixed targets during bad weather, thus helping the U.S. Air Force perform even in inclement conditions.

Raytheon is expected to start delivery of the missile from 2013 with a required assets available date in late 2014.

A Raytheon-led consortium recently (July 2010) lost a contract from the U.K. government worth approximately $1.14 billion (?750 million). The U.K. government decided to discontinue the e-border contract as critical parts of the program were running late by at least 12 months. The government also proclaimed that it had no confidence in the U.S. company.

In spite of the lost contract from the UK government, Raytheon continues to win new orders from the U.S. defense departments, a few recent ones being the $13.7 million U.S. Navy contract to upgrade the Aegis weapons system, $23 million U.S. Army contract extension to provide mission support and system sustainment for the Rapid Aerostat Initial Deployment systems and $250 million from the U.S Navy for support of the V-22 aircraft.

Raytheon’s adjusted earnings during the end of second-quarter 2010 came in at 56 cents a share compared to $1.24 per share in the year-ago quarter. The Zacks Consensus Estimate for the third quarter of 2010, full-year 2010 and full-year 2011 is pegged at $1.15 per share, $4.27 per share and $5.26 per share, respectively.

We believe the new stream of orders received by Raytheon will allow it to repair the damage caused by the loss of the e-border contract.

We retain a short-term Zacks #3 Rank on the stock, which indicates a Hold rating. Given our apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs and risks related to key projects execution, we presently maintain a Neutral rating on the stock.

Zacks Investment Research

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