Raytheon executives like to say their products hit the sweet spot of the Pentagon’s desire for next-generation weapons: fast-flying hypersonic missiles, radars that can track all sorts of flying objects, anti-missile interceptors, and more.
Last week, the company locked down another big deal to replace the Army’s Patriot missile defense radar. This new Lower Tier Air and Missile Defense Sensor is supposed to track drone swarms, maneuvering cruise missiles, and fast-flying hypersonic weapons — all expected on the battlefields of the future.
And that initial $384 million contract covers just a half-dozen of the 250 Patriot radars operated by the United States and its allies, leaving lots of room for more sales.
“This is a $20 billion-plus type of opportunity for us over a number of years,” Raytheon CFO Toby O’Brien told me this morning before the company’s quarterly earnings call with Wall Street analysts. “It's not going to happen overnight, but it's significant financially, from both an upgrade point of view and then beyond that sustainment and maintainability of these fire units. It's significant.”
“The win really reinforces the company's position as the leading air and missile defense radar capability provider as well,” O’Brien said.
Here’s some rapid-fire Q&A from my chat with O’Brien, who is slated to continue on as CFO under the proposed Raytheon-UTC merger.
Q. What are the next big milestones in the planned Raytheon-UTC merger now that shareholders approved the deal?
A. Really, the next big step is continuing to work closely with regulatory authorities, both in the U.S. and other jurisdictions, to get the required clearances and approvals for the merger. Things are on track there. It's not a Raytheon thing to do, but UTC obviously has to successfully spin off their Carrier and Otis businesses. So bottom line, we're confident in the merger. We believe it's on track [and] that it's going to be good for everyone, for shareholders, customers and employees.
Q. Now that the Army has disqualified Raytheon and its German partner Rheinmetall from competing to replace the Army’s Bradley Fighting Vehicle, how is your company responding?
A. Raytheon, with our partner, we remain ready to engage [and] work with the Army, trying to identify if there is a potential path forward back into the program...in order to enable competition, which, I think generically is clearly in the best interest of the customer. We will continue to work that and stand by ready to do so. At the end of it, obviously, we're going to do what the Army wants and what's right for the Army, but we think we've got a good offering. The vehicle that we were putting forward here had been selected for a similar program in Australia. We're confident in the capabilities and the features that the offering would have and we'll keep working with all stakeholders here to see if there's anything we can do going forward.
Q. Can you talk about new hypersonic or counter-hypersonic work?
A. We continue to work in the same areas that we've talked about in the past. We did get some incremental work. Our backlog has grown to about $750 million through the third quarter, based upon some of the awards that we saw in the quarter, which mostly was add-ons or follow-ons to work that we were working on. We'll probably do about $300 million in revenue, combined on hypersonics and counter-hypersonics work this year. We're progressing well and we're pleased with what the teams are doing there.
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Highlights from Q3 Earnings Calls
Boeing: No surprise that nearly the entire call focused on the grounded 737 Max. No one on Wednesday’s call mentioned the $85 billion Minuteman III ICBM replacement, what the Air Force calls the Ground Based Strategic Deterrent. Boeing has said it will not bid because the Air Force is favoring competitor Northrop Grumman. This week, the Air Force stopped Boeing’s development work for that new ICBM.
General Dynamics: The company is still awaiting payments for a Saudi armored vehicles being built in Canada. “It's simply a question of timing and we are still hopeful that we resolve that by the end of the year,” CEO Phebe Novakovic said Wednesday.
Lockheed Martin: CEO Marillyn Hewson reminded everyone that the U.S. government is being funded through a continuing resolution through Nov. 21. “We do not expect any impact to our 2019 financial outlook from this current short-term CR,” Hewson said Tuesday. “Should the continuing resolution and its associated budget constraints be extended beyond Nov. 21, we could experience some level of impact to our 2020 trending data depending on the duration of the CR.”
- Lockheed Martin: $137.4 billion, up $400 million since Q2.
- General Dynamics: $67.4 billion, down $300 million.
- Raytheon: $44.6 billion, up $1.5 billion.
- Northrop Grumman: $65 billion, up $2 billion.
- Boeing Defense, Security and Space: $62 billion (30% international), down $2 billion (31% international).
Still to come: L3 Harris Technologies reports next Wednesday.
Air Force Tanker Enters Operational Testing
But even word of that step forward for the troubled KC-46 aerial refueling tanker had a caveat. “The Air Force continues to test the new weapon system, while Boeing corrects identified deficiencies in parallel, as the most expeditious means of achieving full operational capability,” the service said in an emailed statement. “Air Force leadership remains concerned with Boeing’s slow progress resolving issues limiting the KC-46’s operational capability and continues to work with Boeing to ensure the KC-46 meets all essential mission requirements.” Last month, Air Force leaders said it would be three or four years before the tanker is ready for war.
Navy Makes F-35 Component for 75 Cents
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Montenegro Buying JLTV
Rolls-Royce Moves North America HQ
It’s not too far: the company is moving from Reston Town Center to a new building at Reston Station. “The 16-story glass tower, the first Virginia building designed by world-renowned architect Helmut Jahn features a concrete exoskeleton structural system that facilitates completely column-free interior office spaces,” Comstock Holding Companies, the building developer, said in an Oct. 18 statement.
More About Defending Stadiums from Drones
A few weeks ago, we told you about how Raytheon has developed a new technology that can spot hobby-shop drones and even the people flying them. The company wouldn’t say where it’s been testing the technology, but we need to post a picture with each story. So I began searching for a picture of a stadium. As a New York Jets fan (and it takes real courage to admit that this week, folks), I grabbed a picture of Jets home field Metlife Stadium. (Across the newsroom, a Chicago-born colleague cross-posted the story on Government Executive with a photo of Soldier Field.)
Turns out Metlife Stadium is already protected from drones. AirWarden, a product made by AeroDefense Drone Detection System, has been guarding the stadium since 2018. But the company hadn’t gone public with that info until Oct. 17, seemingly prompted by our article. We’ve changed the picture on our original post to one of Citi Field, the home of the New York Mets. If your company company makes anti-drone tech protecting the stadium, let me know and I’ll replace the picture with another venue.
Gulfstream Unveils Long-Range Bizjet
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