Raytheon with $600 million contract for US Army

Raytheon (RTX.US) is one of the leading contractors of weapons and technology to the US Army. The company has signed a new contract with the Department of Defense: 

• Raytheon has installed the first global strategic terminal for the ASNT aircrew network for the US Air Force. The installation will improve communication, control and connectivity to facilitate real-time command of fleets of aerial refueling tankers or reconnaissance aircraft;

• The ASNT system provides communication capabilities between missiles, B-2 nuclear bombers and control of the nuclear arsenal; 

• The contract is for $134m, but includes options that will increase its value to $600m once Raytheon has completed the work. Raytheon received the new contract through the US Army Air Force Nuclear Weapons Center to support the Global Strike Command's decision-making loop;

• Raytheon is expected to produce 90 mobile and fixed terminals by the end of next year, and will also provide spare parts and service;

"Operating on both MILSTAR and Advanced Extremely High Frequency satellites, Global ASNT systems use satellite communications to provide command and control, linking nuclear forces to national command authorities," - said Denis Donohue, head of Intelligence & Space at Raytheon. He also added that " (...) the enhanced capabilities will provide access to critical data needed at the tactical frontier to make smart decisions in near real-time, including supporting Department of Defense command and control initiatives across all domains for the combined services."

This shows how important space is becoming for the Pentagon to enable efficient communications and information superiority. The Department of Defense also recently reported on a significant deal between OneWeb and Hughes subsidiary Echostar (SATS.US) for a 5G communications system for the military.

RBC Capital analyst Ken Herbert rated Raytheon shares 'Outperform' with a $125 price target. The analyst also forecasts commercial aftermarket sales to grow from $14bn in 2021 to $26bn in 2025 highlighting the long-term outlook for Raytheon's business. 

Combined all 4 Raytheon divisions generated over $64bn in 2021 and over $5bn in free cash flow. Prior to the outbreak of war in Ukraine, analysts expected a 10% increase in sales and nearly 20% increase in free cash flow in 2022; in the context of political change and the outbreak of war, the results may prove better.

Raytheon (RTX.US), W1 Interval. The stock has been moving in an uptrend since the covid crash in March 2020. After the outbreak of the war in Ukraine, the share price crossed the historical peaks of February 2020, the trend continues.  In the upward movement, there were two attempts by sellers to beat the price, but it was the demand side that was able to maintain control. Psychological support for the share price remains at the $100 boundary and the levels at $93 from February 2020. The increase in defense spending in the US and the need to modernize deterrence systems may stimulate the growth of the company's shares.