(RTN) Raytheon’s Excalibur Ib Nearer

Raytheon Company (RTN) has received a $36.0 million contract from the U.S. Army for the final phase of the Excalibur Ib development program. With this final phase, the program will complete its warfighter tests and Excalibur Ib will also qualify for fielding.

The Excalibur Ib is a long-range, precision-guided artillery projectile based on Raytheon’s combat-proven Excalibur Ia. It has a non-spinning fixed base, and requires simpler manufacturing than Excalibur Ia that increases reliability and significantly reduces cost. Historically, Excalibur is the world’s only deployed extended-range GPS-guided artillery round, and has been fired more than 300 times in theater since its early fielding in 2007.

Excalibur Ib was designed to fulfill the needs of the warfighter incorporating a reprogramming port that makes it possible for the warfighter to modify the performance of the round in response to changing threats and evolving tactics. Both the U.S. Army and Marine Corps have increased their use of this life-saving weapon since 2010. Since August 2010, Raytheon has conducted more than 50 live-fire tests on the Excalibur Ib.

Raytheon is one of the best-positioned companies among the large-cap defense players because of its non-platform-centric focus. Looking forward, the company enjoys strong order bookings and order backlog, an improving balance sheet, growing cash flow and operational improvements.

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. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Raytheon Company is a technology and innovation leader specializing in defense, homeland security and other government markets throughout the world. Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems; as well as a broad range of mission support services. Some of its primary competitors include Lockheed Martin Corporation (LMT) and Northrop Grumman Corporation (NOC).

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