Raytheon's Standard Missile-3 Receives $28 Million in New Funding

Raytheon (NYSE: RTN  ) landed another big contract win from the Pentagon Monday.

The Department of Defense awarded its Missile Systems division a modification to a pre-existing contract to perform "post-preliminary design review work" on the Standard Missile-3 missile system. This contract, which covers work through the software release date (and is expected to wrap up by Sept. 30, 2015), adds $28.3 million to Raytheon's funding on the project, and lifts the total value of Raytheon's SM-3 contract to $689.1 million.

The total value could go even higher than that, however. The underlying contract, modified by Monday's award, was clocked at a ceiling value of $809 million back in March 2012. This suggests that Raytheon could eventually collect a further $120 million for its work on the SM-3.

SM-3 is being incorporated into the U.S. Missile Defense Agency's Aegis Ashore Missile Defense System (AAMDS), a Lockheed Martin (NYSE: LMT  ) project designed to convert the Aegis air defense system into a true defense against intercontinental ballistic missiles. Lockheed's most recent contract on the system, like Raytheon's, has an expected completion date in 2015. However, the AAMDS system as a whole is not expected to be complete before 2021 -- suggesting that even the $809 million cost estimate may prove conservative.

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10/21/2014 4:01 PM
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