Raytheon Technologies Corp.’s ( RTX Quick Quote RTX - Free Report) Pratt and Whitney Military Engines unit recently clinched a contract for procuring performance-based logistics activities to support the F-135 propulsion system. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD. Details of the Contract
Valued at $642 million, the contract is projected to be completed by November 2021. In particular, the Pratt and Whitney unit will offer maintenance of support equipment, common program activities, unique and common base recurring sustainment, common replenishment spares and a few more activities to support the F135 propulsion system.
The majority of the work related to the deal will be carried out in East Hartford, CT.
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 Quick Quote LMT - Free Report) , with BAE Systems ( BAESY Quick Quote BAESY - Free Report) and Northrop Grumman ( NOC Quick Quote NOC - Free Report) 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 third quarter, the company won a handful of notable contracts. Consequently, it witnessed record bookings of $8.4 billion, reflecting a 133% improvement from the prior-year quarter figure, which translated into a solid backlog of $70.2 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 boast similar record backlog in the coming days as well, thereby bolstering its growth trajectory.
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 13.2% in the last six months compared with the
industry’s surge of 19.3%. The company currently carries a Zacks Rank #4 (Sell).
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