Raytheon Company (NYSE:RTN) was awarded a $312 million manufacturing contract for the Standard Missile-3 Block IB program by the U.S. Department of Defense Missile Agency. The contract provides the necessary funding to carry out the development phase of the program.

The Standard Missile 3 is a ship-based missile system used by the US Navy to intercept aircraft, ships, ballistic and cruise missiles as a part of the Aegis Ballistic Missile Defense System.

The Aegis Ballistic Missile Defense System program is managed by the U.S. Department of Defense Missile Defense Agency. The program focuses on providing defense against ballistic missiles. It is part of the U.S. national missile defense strategy. Lockheed Martin Corporation’s (NYSE:LMT) Aegis Ballistic Missile Defense System is an integrated naval weapons system that is designed to intercept ballistic missiles.

Raytheon is developing SM-3 as part of the Aegis Ballistic Missile Defense System, and till date more than 130 SM-3s have been delivered. The missiles are deployed with both U.S. and Japanese navies to defend against short- to intermediate-range ballistic missile threats in the initiation and midcourse phases of a flight.

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.

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, operational improvements and an above industry average ROE.

Raytheon’s strong balance sheet provides financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions.

Raytheon in March 2011 raised its quarterly dividend by 15%, bringing its annualized dividend rate to $1.72 per share from the previous payout rate of $1.50 per share.

As a result the company will now pay a quarterly dividend of $0.43 per share to its shareholders, compared with $0.375 paid earlier. The increased quarterly dividend will be paid on April 28, 2011 to shareholders of record as on April 6, 2011.

The above positives however are offset by apprehensions over future growth in 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.

 
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