Raytheon Technologies Corp.’s RTX business segment, Missiles and Defense, recently clinched a modification contract for MK 15 close-in weapon system (CIWS). The award has been provided by the Naval Sea Systems Command, Washington Navy Yard, Washington, DC.
Valued at $113.6 million, the contract is expected to be completed by September 2026. Per the terms of the deal, Raytheon will provide upgrades and conversions, system overhauls and associated hardware for MK 15 CIWS.
A major portion of the work related to this deal will be executed in Louisville, KY and Tucson, AZ.
Significance of MK15 CIWS
Raytheon’s MK 15 Phalanx CIWS is a fast-reaction, rapid-fire 20-millimeter gun system that has been designed to engage anti-ship cruise missiles and fixed-wing aircraft at a short range. The Phalanx weapon system carries out functions such as search, detection, threat evaluation, tracking, engagement and kill assessment, usually performed by multiple systems.
Rising air threats worldwide have spiked demand for CIWS in a bid to strengthen nations’ air defense systems. Consequently, Raytheon’s Phalanx MK15 CIWS weapon system has been installed in all U.S. Navy surface combatant ship classes and those of 24 allied nations. This highlights the strong demand that the Phalanx weapon system enjoys globally.
Prospects for Raytheon Technologies
The rising geopolitical tension across the globe, along with ongoing Russia-Ukraine conflict, has led many countries to increase their defense budget to improve and modernize warfare capabilities. In such a scenario, spending on high-tech equipment that is most suitable for military operations, gained momentum.
Hence, CIWS, with the capability to counter and terminate short-range incoming missiles and enemy aircraft, is likely to witness strong demand going forward. Per the report from Mordor Intelligence, the global CIWS market is anticipated to witness a CAGR of more than 6% during the 2022-2027 period.
This indicates abounding growth prospects for RTX as its Phalanx MK15 CIWS boasts features of an efficient shipboard defense weapon system against small, fast and agile surface threats. This, in turn, should bolster the company’s revenues from Raytheon’s Missiles and Defense segment.
Opportunities for Peers
The intensifying demand for technologically advanced weapons and arsenals has also spurred demand for an effective CIWS, thereby boosting the market’s growth.
Major industry players poised to gain from the surging CIWS demand are General Dynamics GD, BAE Systems BAESY and Northrop Grumman NOC.
General Dynamics’ Ordnance and Tactical Systems has been a leading supplier of gun barrels to the U.S. Department of Defense for more than 50 years. It produces weapon systems for U.S. Navy shipboard applications and fighter aircraft, including high-speed Gatling guns for all U.S. fixed-wing military aircraft. Phalanx CIWS was designed and manufactured by General Dynamics.
GD’s long-term earnings growth rate is pegged at 8.6%. The Zacks Consensus Estimate for the company’s 2023 sales indicates an improvement of 4.2% from the previous year.
BAE Systems provides a wide range of munitions, explosives, gun systems and artillery systems. Its Mk 38 MGS is a low-cost, stabilized self-defense weapon system that dramatically improves ships' self-defense capabilities in all weather conditions, day or night. Additionally, its Bofors 40 Mk4 gun system, with its high rate of fire and ability to switch between optimized ammunition types, provides high survivability and tactical freedom at all levels of a conflict.
The company boasts a long-term earnings growth rate of 13.7%. The Zacks Consensus Estimate for BAESY’s 2023 sales indicates an improvement of 25.4% from the previous year.
Northrop Grumman’s Battle Management & Missile Systems designs, develops and integrates multi-domain command and control in weapons systems. Its Counter Rocket, Artillery and Mortar represents a set of systems used to detect and destroy incoming threats.
The company has a long-term earnings growth rate of 3.5%. The Zacks Consensus Estimate for NOC’s 2023 sales indicates an improvement of 4.6% from the previous year.
In the past year, shares of Raytheon Technologies have gained 1.2% against the industry’s 4.5% decline.
Image Source: Zacks Investment Research
Raytheon Technologies currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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