Raytheon (RTX) Wins $2B Contract for F135 Propulsion System
Raytheon Technologies Corp.’s RTX business segment, Pratt & Whitney, clinched a modification contract for F135 propulsion system. The award has been offered by the Naval Air Systems Command, Patuxent River, MD.
Details of the Deal
Valued at $2.02 billion, the contract is projected to be completed by December 2025. Per the terms of the deal, Raytheon will supply materials, parts, and components for the 17th lot of F135 Propulsion system for F-35 Lighting II Joint Strike Fighter aircraft.
The company will also provide spare engines, power modules and other hardware for F-35 jets. The contract will serve the U.S. Air Force, Marine Corps, Navy, Non-U.S. Department of Defense participants, cooperative program partners and Foreign Military Sales (FMS) customers.
A major portion of the work related to this deal will be executed in East Hartford, CT and Indianapolis, IN.
Raytheon’s Growth Prospects
Combat aircraft witnessed a surge in demand with the rapid rise in political risks and global terrorism. In this context, F-35 jets, built by America’s largest defense contractor, Lockheed Martin LMT, enjoy a lucrative position in the combat aircraft arena and witness a steady flow of orders from the U.S. Army, seven international partner countries and eight FMS customers.
Lockheed Martin has delivered 899 F-35 airplanes since the program's inception, with 340 jets in the backlog as of Mar 26, 2023. This reflects the solid demand that this jet program enjoys in the defense space, resulting in multiple order wins for both LMT and RTX. The latest contract win is a bright example of that.
Looking ahead, the production of F-35 jets is expected to continue for several years, given the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps and Navy.
Consequently, Pratt & Whitney, which builds F-35’s engine, may expect to witness more order inflows for the F-35 engine and its propulsion system in the coming days, like the latest one. This should significantly bolster this defense contractor’s top line.
Peer Growth
Apart from Lockheed Martin and Raytheon, defense majors that stand to benefit from the expanding production rates of F-35 are:
Northrop Grumman NOC: The company renders its expertise in carrier aircraft and low-observable stealth technology for the F-35 program. A pioneer in the development of manned combat aircraft, NOC has a tradition of providing technological leadership in all aspects of military aviation and aircraft.
Northrop Grumman has a long-term earnings growth rate of 3.8%. The Zacks Consensus Estimate for NOC’s 2023 sales indicates a year-over-year improvement of 4.7%.
BAE Systems’ BAESY: This defense major’s short takeoff and vertical landing experience, along with air systems sustainment support F-35’s combat capabilities. The company provides an electronic warfare suite for F-35, which includes fully integrated radar warning (targeting support and self-protection) to detect and defeat surface and airborne threats.
BAE Systems boasts a long-term earnings growth rate of 13.7%. The Zacks Consensus Estimate for BAESY’s 2023 sales indicates an increase of 25.4% from the previous year’s reported figure.
Price Movement
In the past year, shares of Raytheon have rose 1.3% compared with the industry’s growth of 0.2%.
Image Source: Zacks Investment Research
Zacks Rank
Raytheon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
Bae Systems PLC (BAESY) : Free Stock Analysis Report
Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report
