Raytheon (RTX) Secures $624M Deal to Produce Stinger Missiles

Raytheon Technologies Corp.’s RTX Missiles and Defense unit recently clinched a $624-million contract from the U.S. Army to produce 1300 Stinger missiles to refill the missile’s stock provided for the Ukraine war support.

Per the deal, Raytheon Technologies will offer engineering support and the support needed to address the obsolescence of key equipment. The contract also involves modernizing and upgrading significant components to further enhance the capability of the missile, thereby accelerating production.

Significance of Stinger Missiles

The combat-proven Stinger missile is a lightweight, self-contained air defense system that can be rapidly deployed by ground troops. Its supersonic speed, agility and highly accurate guidance and control system give the weapon an operational edge against cruise missiles and all classes of aircraft.

The missile has been enjoying strong demand amid the ongoing war between Ukraine and Russia, in which the former used the missile to stop the Russian attacks. Almost 1400 Stinger missiles were sent to Ukraine to defend the country from the Russian assault, which led to a depletion of the stock for the U.S. Army.

Due to its remarkable features that can effectively assist in military operations, the Stinger missile has a strong footprint globally. Moreover, the recent performance of the missile in repelling Russian attacks significantly bolstered its demand from the European countries as well. To this end, Raytheon Technologies may continue to witness a steady inflow of orders involving the Stinger missile. This, in turn, is expected to boost RTX’s missiles and defense business unit revenues in the coming days.

Prospects for Raytheon Technologies

The recent turbulence between Russia and Ukraine has led nations to strengthen their warfare capabilities to deter any warfare-like situation and repel any sudden assault. In this context, the demand for missiles may increase manifold as these have the immense destructive power to support military operations efficiently.

Per the report from the Markets and Markets firm, the global rockets and missile market is anticipated to witness a CAGR of 4.8% during the 2021-2026 period.

Raytheon Technologies’ Missiles & Defense business unit, a leading designer, developer, integrator, producer and sustainer of integrated air and missile defense systems, should thus witness strong growth acceleration, which will be instrumental to its overall growth trajectory.

Benefits for Peers

Considering the aforementioned expanding size of the market, defense behemoths that stand to benefit from the rewarding missile market are:

Northrop Grumman NOC designs and produces missile products, including advanced high-speed propulsion systems, fuses, warheads and controls for air, sea and land-based systems. Its missile defense program includes AGM-88E advanced anti-radiation guided missiles, the Ground Based Strategic Deterrent weapon system and rocket propulsion systems.

Northrop Grumman has a long-term earnings growth rate of 6.1%. NOC’s investors have gained 28.7% in the past year.

Lockheed Martin’s LMT Missiles and Fire Control business unit develops, manufactures and supports advanced combat missiles and rockets for military customers, including the U.S. Army, Navy, Air Force, Marine Corps, NASA and dozens of foreign allies. Some of its prominent products include the PAC-3 missile and the Terminal High Altitude Area Defense missile.

Lockheed Martin’s long-term earnings growth rate is pegged at 5.7%. Shares of LMT have returned 17.9% value to investors in the past year.

General Dynamics’ GD Ordnance and Tactical Systems is the system integrator of the 2.75-inch Hydra-70 family of rockets. It also produces composite rocket motor cases and launch tubes for tactical and strategic missiles.

General Dynamics boasts a long-term earnings growth rate of 9.8%. GD stock has appreciated 19.3% in the past year.

Price Movement

In the past year, shares of Raytheon Technologies have rallied 9% against the industry’s decline of 0.4%.

Image Source: Zacks Investment Research

Zacks Rank

Raytheon Technologies 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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