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Raytheon Wins $459M Contract for Secure Voice Transmission
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Defense behemoth Raytheon Company recently secured a foreign military sales (FMS) contract for full-rate production of VINSON/Advanced Narrowband Digital Voice Terminal (ANDVT) Cryptographic Modernization (VACM) program. This deal has originated from a sole-source acquisition.
Details of the Deal
Valued at $459 million, this contract was awarded by the Air Force Life Cycle Management Center, Joint Base San Antonio - Lackland, TX. Raytheon will utilize procurement funds of 2015, 2016 and 2017 for this contract.
Per the terms of the deal, VACM End Cryptographic Unit (ECU) will maintain function and capability of the existing VINSON and ANDVT ECUs to the extent allowed by the National Security Agency. Work related to this contract will be carried out in Fort Wayne, Indiana and Largo, FL; and is scheduled to be over by Dec 15, 2021.
What is ANDVT?
ANDVT is a secure voice terminal that is used for low bandwidth secure voice communications throughout the U.S. Department of Defense (DoD). On the other hand, VINSON is a family of voice encryption devices used by the U.S. and allied military and law enforcement, which offer tactical secure voice on UHF and VHF line of sight (LOS), UHF SATCOM communication and tactical phone systems.
Otherwise known as VACM, the VINSON/ANDVT Crypto Modernization program is a highly competitive project that is user-friendly and has set new standards for encryption performance. Raytheon's cost-efficient cryptographic module, incorporated in the VACM program, facilitates safe transmission of voice and data traffic as well as maintains security parameters for smooth communication of encrypted information.
Our View
With the U.S. fiscal 2016 bill focusing on cyber programs, cyber-oriented work is expected to yield solid growth going forward. Raytheon is a technology leader in the U.S. defense, homeland security and markets of foreign allies to the U.S. It also holds a strong position in the cyber security solution space.
In the third quarter of 2016, Forcepoint, Raytheon’s cybersecurity product business recorded sales growth of 31%. Given the rapid digitization in the world, the company is consistently updating its strategic plans to address key areas of the ever-expanding cybersecurity market, where it believes to have a strong leadership potential. Accordingly, we expect the aforementioned contract to substantially boost Raytheon’s cybersecurity business.
Price Movement
Raytheon’s dependence on the U.S. government for military contracts, tough competition and political uncertainty are exerting pressure on its stock price. That could be why Raytheon’s stock gained about 11.9% over the last one year, underperforming the Zacks categorized Aerospace–Defense Equipment industry’s gain of 15.5%. The company has also put up a weak show in comparison to other major players in the same space like Northrop Grumman Corp (NOC - Free Report) , Ducommun Inc. (DCO - Free Report) and Lockheed Martin Corp (LMT - Free Report) , all of which outperformed the industry.
The company has witnessed seven downward estimate revisions for the current quarter over the last 60 days. The estimates have moved down from $1.96 to $1.86 per share, reflecting a decline of 5.1%.
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Raytheon Wins $459M Contract for Secure Voice Transmission
Defense behemoth Raytheon Company recently secured a foreign military sales (FMS) contract for full-rate production of VINSON/Advanced Narrowband Digital Voice Terminal (ANDVT) Cryptographic Modernization (VACM) program. This deal has originated from a sole-source acquisition.
Details of the Deal
Valued at $459 million, this contract was awarded by the Air Force Life Cycle Management Center, Joint Base San Antonio - Lackland, TX. Raytheon will utilize procurement funds of 2015, 2016 and 2017 for this contract.
Per the terms of the deal, VACM End Cryptographic Unit (ECU) will maintain function and capability of the existing VINSON and ANDVT ECUs to the extent allowed by the National Security Agency. Work related to this contract will be carried out in Fort Wayne, Indiana and Largo, FL; and is scheduled to be over by Dec 15, 2021.
What is ANDVT?
ANDVT is a secure voice terminal that is used for low bandwidth secure voice communications throughout the U.S. Department of Defense (DoD). On the other hand, VINSON is a family of voice encryption devices used by the U.S. and allied military and law enforcement, which offer tactical secure voice on UHF and VHF line of sight (LOS), UHF SATCOM communication and tactical phone systems.
Otherwise known as VACM, the VINSON/ANDVT Crypto Modernization program is a highly competitive project that is user-friendly and has set new standards for encryption performance. Raytheon's cost-efficient cryptographic module, incorporated in the VACM program, facilitates safe transmission of voice and data traffic as well as maintains security parameters for smooth communication of encrypted information.
Our View
With the U.S. fiscal 2016 bill focusing on cyber programs, cyber-oriented work is expected to yield solid growth going forward. Raytheon is a technology leader in the U.S. defense, homeland security and markets of foreign allies to the U.S. It also holds a strong position in the cyber security solution space.
In the third quarter of 2016, Forcepoint, Raytheon’s cybersecurity product business recorded sales growth of 31%. Given the rapid digitization in the world, the company is consistently updating its strategic plans to address key areas of the ever-expanding cybersecurity market, where it believes to have a strong leadership potential. Accordingly, we expect the aforementioned contract to substantially boost Raytheon’s cybersecurity business.
Price Movement
Raytheon’s dependence on the U.S. government for military contracts, tough competition and political uncertainty are exerting pressure on its stock price. That could be why Raytheon’s stock gained about 11.9% over the last one year, underperforming the Zacks categorized Aerospace–Defense Equipment industry’s gain of 15.5%. The company has also put up a weak show in comparison to other major players in the same space like Northrop Grumman Corp (NOC - Free Report) , Ducommun Inc. (DCO - Free Report) and Lockheed Martin Corp (LMT - Free Report) , all of which outperformed the industry.
The company has witnessed seven downward estimate revisions for the current quarter over the last 60 days. The estimates have moved down from $1.96 to $1.86 per share, reflecting a decline of 5.1%.
Zacks Rank
Raytheon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>