(RTN) Raytheon Wins Korean Contract

Defense contractor Raytheon Company (RTN) won a $65.5 million contract to deliver five Phalanx Block 1B Close-In Weapon Systems to the Korean Navy. The direct commercial sale calls for the systems to be installed on the 2,300-ton frigate-class ships starting in April 2013, and represents Phalanx’s largest sale to the Republic of Korea‚Äôs naval fleet.

Phalanx is a rapid-fire, computer-controlled radar and 20 mm gun system that automatically acquires, tracks and destroys enemy threats that have penetrated all other ship defense systems. More than 890 systems have been built and deployed in the navies of 25 nations. The Phalanx Weapon System was originally manufactured by General Dynamics Corporation (GD) but was sold in 1992 to Hughes Missile Systems Company. Subsequently, Hughes was acquired by Raytheon.

Raytheon is one of the best-positioned companies in the defense sector. Looking forward, growth will be driven by its focus on intelligence, surveillance and reconnaissance unmanned systems, training, cyber security, Standard Missile-6, Patriot, Zumwalt and THAAD.

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). We have a long-term Neutral recommendation on the stock.

Recently, Raytheon Company reported second-quarter 2011 operating earnings of $1.39 per share, beating the Zacks Consensus Estimate of $1.16. Results were, however, higher than the year-ago quarterly earnings of $1.34 per share.

Headquartered in Waltham, Massachusetts, Raytheon Company is a technology and innovation leader specializing in defense and homeland security markets throughout the world. The company mainly competes with The Boeing Company (BA) and Northrop Grumman Corporation (NOC).

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