Raytheon Technologies Corp.’s RTX business unit, Pratt and Whitney, recently secured a modification contract for offering one conventional take-off and landing and two short take-off/vertical landing F135 engines to support F-35 Lightning II Block Four developmental testing program. The deal has been awarded by Naval Air Systems Command, Patuxent River, MD.

Valued at $49.2 million, the contract is scheduled to be completed by January 2023. Majority of the work will be carried out in East Hartford, CT; Kent, WA and El Cajon, CA.

The contract will serve the U.S. Air Force, Navy, Marine Corp and non-U.S. Department of Defense (DOD).

Growing Jet Demand Aiding F-135

Rising security threat from terrorist activities and adverse geopolitical situations have resulted in increased demand for defense products, of which combat aircraft constitutes a major portion. Given F-35’s advanced stealth capabilities, combined with fighter aircraft speed and agility, F-35 jet dominates the combat aircraft market.

Notably, Pratt & Whitney's F135 propulsion system powers all the three variants of F-35, the combat-proven fighter jet fighter developed by defense major Lockheed Martin LMT, with BAE Systems BAESY and Northrop Grumman NOC being the co-manufacturers. Notably, F135 is the world’s most advanced fighter engine, delivering more than 40,000 lbs. of thrust and unmatched advances in safety, design, performance, and reliability.

Therefore, as demand for fighter jets increases, with F-35 constituting a major portion of that demand, the need for its F-135 propulsion systems is also on the rise. This can be justified considering the latest deal won by Raytheon Technologies.

How Will This Deal Aid Raytheon Technologies?

Thanks to its wide range of combat-proven defense products, Raytheon Technologies continues to receive ample orders from the Pentagon and its foreign allies. Keeping up with its usual trend, during the fourth quarter of 2020, the company won a handful of notable contracts. Consequently, it witnessed record bookings in the fourth quarter, which translated into a solid backlog of $67.3 billion.

These impressive results make us optimistic of the revenue growth prospects of the company, which, in turn, will boost its bottom line, over the long run. Impressively, the latest contract win should enable this defense major to enjoy similar record backlog in the coming days as well, thereby bolstering its growth trajectory.

Growth Prospects

Considering the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps and Navy, we expect production of F-35 jets to continue steadily over the long run. Consequently, Raytheon Technologies is also projected to witness more order inflows for its F-135 propulsion systems, as increasing number of F-35 jets will push up the need for propulsion systems. This in turn should bolster Raytheon Technologies’ top line in the coming days.

Price Performance & Zacks Rank

Raytheon Technologies’ stock has gained 14.4% in the past six months compared with the industry's rally of 20.7%.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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