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Analysts: Spurred by Syria Talk, Raytheon's Stock Price to Remain High

Defense Giant's Tomahawk Missile Poised for Leading Role

Aug. 28, 2013 - 03:45AM   |  
By JOHN T. BENNETT   |   Comments
US Sailors prepare to load a Tomahawk cruise missile onto the guided-missile submarine Michigan.
US Sailors prepare to load a Tomahawk cruise missile onto the guided-missile submarine Michigan. (US Navy)
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WASHINGTON — Analysts say US defense giant Raytheon’s recent stock price uptick should continue for some time, with its Tomahawk cruise missile poised to star in America’s next likely military operation.

The Raytheon-made cruise missile is loaded on US Navy ships positioned within striking distance of Syrian military targets. The White House is reportedly readying plans for limited military strikes to punish Syrian leader Bashar al-Assad for a deadly Aug. 21 chemical weapons attack.

Raytheon’s stock was trading well over $75 per share as of mid-afternoon on Wednesday, up from $71 per share just a few weeks ago.

What changed?

US President Barack Obama and his national security aides decided Assad’s latest alleged use of chemical arms violated the “red line” he established last summer. Once it became clear Obama opposes inserting ground troops and prefers pounding Syrian targets from afar to punish Assad, the Tomahawk and its manufacturer became the darling of Wall Street.

Obama’s shift from the Syrian sidelines to readying to strike sent Raytheon’s stock to a 52-week high of $77.93 this week. The price fell to around $75.25 near Tuesday’s closing bell, before climbing again on Wednesday.

Those prices are well above the stock’s six-month (just under $55 a share) and 12-month ($52.24) lows. The price fluctuated between $55 and $60 from March to late April, climbing to nearly $65 by late May. It hovered around $65.50 during June and for much of July, then began a slow climb toward current levels.

Analysts say there are many reasons the stock is suddenly more popular on “The Street.”

“Tomahawk is once again proving to be the ideal weapon for a measured response to aggression,” said Loren Thompson, a defense industry analyst and consultant.

“But the Navy needs to greatly increase the number of cruise missiles in its inventory so it can cope with protracted contingencies,” the Lexington Institute COO said on Wednesday. “That raised the prospect of new sales for Raytheon.”

Lawrence Korb, a former Pentagon official now with the Center for American Progress, said Raytheon’s stock price began to climb “once people began saying, ‘We weren’t going to send in ground troops but we are going to do something.’ ”

“It became pretty clear that meant cruise missile strikes,” Korb said. “That means the Tomahawk. And if you’re going to shoot a whole bunch of them, you’re going to have to buy more.”

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