(RTN) Raytheon Certified on Radar Upgrade

Raytheon Company (RTN) received certification from the Federal Aviation Administration (“FAA”) with respect to the upgrade of aging radar electronics. The administration stated that the company’s advanced electronics system has achieved a milestone for the Long Range Radar Service Life Extension Program (“SLEP”).

The federal body believes that the new upgraded radar transmitters can see out farther, provide improved detection and has clutter management capability. It has given an in-service decision signal that shows that the system has met the requirements of the contract in areas such as performance, reliability and maintainability. This certification has paved the way for production deployments.

This program upgrade has led to improvements in terms of reliability and operational performance. Moreover, it satisfies the government’s objective to extend supportable life by at least 20 years and also control life-cycle costs while improving security in the skies.

Raytheon is in the process of upgrading the electronics that feed radar information to the U.S. government, including the North American Aerospace Defense Command, the departments of Homeland Security and Defense, and the FAaA.

Currently, there are three radar systems operational in the National Airspace System, including the first production system deployment in Coopersville, Michigan. Two more systems are operational at the FAA Academy in Oklahoma City, where they are being used for training and engineering support. Each one of the radars provides surveillance over a 400 nautical mile coverage rea and detects commercial and military aircraft.

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. Future growth is expected to be driven by its focus on ISR 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) that corresponds with our long-term Neutral recommendation on the stock.

Based in Massachusetts, Raytheon Company is one of the largest aerospace and defense companies in the U.S., with a diversified line of military products, including missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems, naval systems, air traffic control systems, and technical services. The company mainly competes with Northrop Grumman Corporation (NOC) and Lockheed Martin Corporation (LMT).

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