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Raytheon (RTX) Wins $511.6M Deal for F135 Propulsion System

Raytheon Technologies Corp.’s RTX business segment, Pratt & Whitney, recently inked a modification contract involving the F135 propulsion system. The Naval Air Systems Command, Patuxent River, MD, offered the award.

Details of the Deal

The deal is valued at $511.6 million. As part of the contract, Pratt & Whitney will offer annual sustainment for the F135 propulsion system, including recurring sustainment support and other program and management services involving the F135 propulsion system.

The work related to this deal will be carried out at multiple locations across the United States, with the majority of the work to be executed in East Hartford, CT. It is scheduled to be completed by May 2023.

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 involving the aircraft from the U.S. Army, seven international partner countries and eight Foreign Military Sales customers.

Lockheed Martin delivered 841 F-35 airplanes since the program's inception, with 271 jets in the backlog as of September 2022. The strong international demand for F-35 in the first three quarters of 2022 resulted in multiple order wins for LMT and RTX.

Further, the production of F-35 jets is expected to continue for many years ahead, 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 as follows:

Northrop Grumman NOC 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, Northrop has a tradition of providing technological leadership in all aspects of military aviation and aircraft.

Northrop Grumman has a long-term (three to five years) earnings growth rate of 2.9%. NOC’s investors have gained 51.6% in the past year.

BAE Systems’ BAESY short takeoff and vertical landing experience and 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%. BAESY stock has appreciated 32.9% in the past year.

Price Movement

In the past year, shares of Raytheon Technologies have rallied 23.2% compared with the industry’s growth of 12%.

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Zacks Investment Research

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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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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

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