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Raytheon (RTX) Wins $972M Deal to Support AMRAAM Program

·3 min read

Raytheon Technologies Corp.’s RTX business segment, Missiles and Defense, recently secured a modification contract to manufacture the Advanced Medium-Range Air-to-Air Missile (AMRAAM). The award has been provided by the Air Force Life Cycle Management Center, Air Dominance Division Contracting Office, Eglin Air Force Base, FL.

Details of the Deal

Valued at $972.2 million, the contract is expected to be completed by Aug 30, 2025. Per the terms of the agreement, apart from manufacturing AMRAAM, Raytheon will also provide the AMRAAM Telemetry System, initial and field spares, as well as other production engineering support hardware and activities.

The work related to this deal will be carried out in Tucson, AZ. 42% of the contract value constitutes foreign military sales.

How Will the Deal Favor Raytheon?

The increasing geopolitical tensions worldwide have prompted nations to strengthen their defense systems manifold. With rapid technological upgrades, missile defense has steadily become pivotal in a nation’s defense strategy. With the United States being the world’s largest weapon supplier and Raytheon being a prominent U.S. missile maker, the increased missile defense adoption by nations offers the company solid growth opportunities.

Raytheon’s AMRAAM is a versatile combat-proven air dominance weapon, which is currently being used by 37 countries worldwide. AMRAAM has been integrated into some of the renowned fighter jets like Boeing’s BA F-15 and F/A-18 as well as Lockheed Martin’s LMT F-22 Raptor and F-35 Lightning.

With this advanced weaponry in its portfolio, RTX enjoys solid demand in the defense space. The latest contract win is an instance of that. This, in turn, is expected to boost the company’s top line in the coming quarters.

Looking Ahead

Per a report by the Allied Market Research firm, the global rocket and missile market is projected to expand at a CAGR of 4.2% during the 2022-2031 period to reach $82 million by 2031. Such massive growth projections indicate solid opportunities for Raytheon Technologies, Northrop Grumman NOC, Lockheed and Boeing, which specialize in developing technologically advanced missiles.

Lockheed Martin’s missile defense program includes the Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense air and missile defense programs. It also manufactures the Multiple Launch Rocket System, Joint Air-to-Surface Standoff Missile and Javelin tactical missile programs alongside other tactical missiles.

Lockheed boasts a long-term earnings growth rate of 5.4%. LMT stock has risen 16.8% in the past year.

Likewise, Boeing’s Integrated Air & Missile Defense portfolio includes Arrow 3, which offers regional missile defense capabilities to enable an effective response to short and medium-range ballistic missiles.

The Zacks Consensus Estimate for Boeing’s 2022 sales suggests an improvement of 14.8% over 2021’s reported figure. BA stock has a long-term earnings growth rate of 4%.

Northrop Grumman’s missile defense program includes AGM-88E advanced anti-radiation guided missiles, the Ground-Based Strategic Deterrent weapon system and rocket propulsion systems.

Northrop boasts a four-quarter average earnings surprise of 3.92%. NOC stock has a long-term earnings growth rate of 2.2%.

Price Performance

In the past year, Raytheon Technologies’ shares have rallied 6.1% compared with the industry’s 0.7% rise.

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Zacks Rank

Raytheon Technologies carries a Zacks Rank #4 (Sell) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The Boeing Company (BA) : Free Stock Analysis Report
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