Raytheon Technologies Corp. RTX recently secured a modification contract worth $6 billion for providing agency depot-level repair and consumable spare parts as well as repair and engineering services for multiple weapon systems. With the recent modification, the ceiling value of the contract increases to $8 billion from $2 billion.
Tasks related to the deal will be executed in Massachusetts, with an estimated completion date of Sep 27, 2021. The contract was awarded by the Defense Logistics Agency Land and Maritime, Aberdeen Proving Ground, MD.
Per a report by the Washington Business Journal, Raytheon Technologies will supply repair and spare parts for the PATRIOT Missile Weapon System assemblies and subassemblies. Per the deal, the company will also supply parts, such as AN/VRC-100 ground/vehicular high-frequency transceivers, AN/ARN-153(V) advanced digital tactical airborne navigation (TACAN) systems and others.
Recent Merger to Create Strong Impact
In April, Raytheon merged with United Technologies to form Raytheon Technologies, thus creating the world's most advanced aerospace and defense systems provider. The combined entity expects to introduce breakthrough technologies at an accelerated pace across high-value areas, such as hypersonics, directed energy, avionics and cybersecurity, in the days to come. The combined expertise will also be instrumental in providing advanced associated services for various weapon systems. The merger has evidently set a more robust foundation for the new company to acquire major contracts, similar to the latest one.
What Favors Raytheon?
Against the backdrop of the heightening geopolitical uncertainties around the world, many nations are increasing their defense spending. This, in turn, has bolstered the demand for weapon systems equipped with advanced technologies. Raytheon Technologies, being one of the world’s largest weapon systems manufacturer, witnesses frequent flow of contracts from the Pentagon as well as foreign allies of the United States for its various products.
Furthermore, the U.S. fiscal 2021 defense budget proposal provisions investments worth $705.4 billion for the Department of Defense. The budget also specifically provisions $780 million for the enhancement of its PATRIOT Missile Weapon System. Such provisions related to supporting multiple weapon systems are likely to benefit the company in the upcoming period. Interestingly, alongside Raytheon Technologies, such stupendous budgetary provisions would also benefit other advanced weapon system manufacturers like Northrop Grumman NOC and General Dynamics GD in the days ahead.
In the past month, shares of Raytheon Technologies have lost 13.5% compared with the industry’s 15.7% decline.
Zacks Rank & Key Picks
Raytheon Technologies currently carries a Zacks Rank #4 (Sell).
A better-ranked stock in the same sector is Lockheed Martin Corp. LMT, which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lockheed Martin delivered a positive earnings surprise of 5.56% in the last reported quarter. The company has a long-term earnings growth rate of 6.9%.
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