The U.S. Navy Has a Mach 7 Cannon, and Raytheon Is Helping to Build It

The deadline for a 2016 test firing at sea approaches.

Jul 19, 2014 at 9:41AM

The U.S. military has a reputation as a somewhat secretive organization. But in at least one respect, the Pentagon is one of the most "open" organizations on the planet.

Ready to aim and fire -- behind the scenes at the Navy's new electromagnetic railgun. Source: U.S. Navy.

Take the U.S. Navy's new superweapon, the electromagnetic railgun, for example (pictured above). Capable of lobbing projectiles at speeds in excess of Mach 7 -- 5,000 mph -- to destroy targets as much as 110 miles distant. Rear Adm. Bryant Fuller, the Navy's chief engineer, calls the EM railgun "an incredible new offensive capability for the U.S. Navy."

It's the kind of project you'd expect to be labeled "top secret..."

But instead, the Navy's outlining its progress every step of the way -- and in public, where investors can watch.

Schematic of potential targets of an electromagnetic railgun. Source: U.S. Navy.

Sometime before the end of 2016, the Navy says it will conduct sea trials on a working prototype EM railgun aboard one of its new Joint High Speed Vehicles. Before that happens, though, the Navy is detailing the award of new contracts to develop the weapons system, and naming names on who will build it.

Names like General Atomics, BAE Systems (NASDAQOTH:BAESY) (LSE:BA) and Raytheon (NYSE:RTN).

Naming names
Over the past few days, the Pentagon has announced that two of these companies -- BAE, which built one of the Navy's two prototype railguns (General Atomics built the other), and Raytheon, an expert in "smartening up" unguided cannon rounds -- are now hard at work ramping up the power available to operate the railgun.

BAE was originally awarded a modest, $11.6 million railgun contract back in December 2011. It's now getting a fourfold boost in funding as the Navy awards it a $43.2 million follow-on contract to continue R&D work on the railgun's "Integrated Power Systems power load modules" through December 2016.

Raytheon, which got its first railgun power load module contract (worth $10.1 million) in October 2011, is getting nearly as big an increase in funding. Its $33.2 million contract "modification," announced last month, is likewise expected to run through the end of 2016.

What it means to investors
With fiscal 2013 sales of $27.9 billion, and $23.7 billion respectively (according to S&P Capital IQ figures), even these multimillion-dollar railgun contracts represent mere drops in the revenue bucket for BAE and Raytheon. Long-term investors, though, should focus on what these contracts could mean for the companies in the future.

The U.S. Navy sank $240 million into R&D on its railgun through "Phase I" of the project. Now in the middle of Phase II, the Navy expects to spend another quarter-billion dollars to "advance the technology for transition to an acquisition program." So already, we're looking at a $500 million weapons program -- before a single combat-ready railgun has been purchased.

Going forward, investors will want to keep an eye out for additional development contracts at BAE and Raytheon, preparatory to the 2016 test date. So far, we haven't heard of any major hitches in the railgun's development. So assuming things continue moving ahead smoothly, we'll want to next look for contracts to develop and upgrade the $25,000-per-projectile ammunition that will form the literal "shooting end" of this new weapons system.

My guess is that Raytheon's work on developing the incredibly accurate, long-range Excalibur cannon ammunition for the Army gives this defense contractor a leg up on winning railgun ammunition contracts.

$70,000 on land, how much money might Raytheon make from applying "Excalibur" technology to sea-borne railgun ammunition? Photo: Wikimedia Commons.

Wild card
One final, possible player in ammunition contracts would be Northrop Grumman (NYSE:NOC), which is currently assisting DARPA in developing a new technology for equipping "dumb" munitions with internal chips for guidance to their target -- "Chip-Scale Combinatorial Atomic Navigators," or C-SCAN. Key to Northrop's involvement would be C-SCAN's ability to survive a high velocity, Mach 7 discharge, which is not yet proven. But if it works as billed, C-SCAN could enable Navy railguns to hit targets more than a hundred miles away, and without any need to rely on jammable GPS transmissions to find their target.

Northrop's work for DARPA is starting out at a low dollar value of just $648,000. But like BAE's and Raytheon's work on the Navy's new railgun, it's a project with real, transformative potential. And thanks to the Pentagon's penchant for detailing its progress in press releases, investors can follow the money every step of the way.

Make sure you don't miss any of the news as the Navy's new electromagnetic railgun moves from concept to completion. "Like" our defense news page today.

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Rich Smith owns shares of Raytheon Company. The Motley Fool owns shares of Northrop Grumman and Raytheon Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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