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Raytheon (RTX) Wins Air Force Deal to Aid StormBreaker SDB

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Raytheon Technologies Corp.’s (RTX - Free Report) business segment, Missiles & Defense, recently clinched a contract to offer life cycle support for StormBreaker Small Diameter Bomb II (SDB II). The award has been offered by the Air Force Life Cycle Management Center, Eglin Air Force Base, FL.

This contract, expected to be completed by Sep 30, 2024, offered a ceiling increase worth $75 million. The total cumulative face value of the contract is $275 million.

Work related to this deal will be executed in Tucson, AZ.

Advantages of the StormBreaker Bomb

Raytheon Technologies' SDB II enables warfighters to hit moving targets in all-weather conditions, especially when the visibility is limited. SDB-II is capable of three modes: a millimeter-wave radar that detects and tracks targets in every weather, imaging infrared for improved target discrimination and a semi-active laser to track lasers in the air or on the ground. Further, the weapon can fly more than 45 miles to strike mobile targets.

What's Favoring Raytheon Technologies?

Increasing geopolitical tensions across the globe have prompted nations to strengthen their defense systems. With rapid technological upgrades, missile defense has been playing a pivotal role in a nation's defense strategy. To this end, Raytheon Technologies' Missiles & Defense unit has secured significant awards from the United States as well as international customers due to its high-end, combat-proven arsenals. The latest contract win is a testament to that.

The U.S. fiscal 2023 defense budget proposal provisioned $24.7 billion for investments in missile defense. This should enable Raytheon Technologies to clinch more contracts related to various missile defense systems and associated services.

Growth Prospects

Per Mordor Intelligence, the missiles and missile defense systems market is estimated to register a CAGR of more than 8% between 2022 and 2031. The growing conflicts between various countries and the increasing number of investments being made by nations in missile defense systems are expected to drive the market. This, in turn, is likely to create solid growth opportunities for Raytheon, a prominent missile maker.

Major missile makers like Northrop Grumman (NOC - Free Report) , Lockheed Martin (LMT - Free Report) and General Dynamics (GD - Free Report) are also expected to benefit, considering the aforementioned growth prospects of the missiles and missile defense market.

Northrop is a prominent developer of missile systems and counter systems, including strategic deterrents as well as subsystems and components. To strengthen its position in the missile market, Northrop acquired Orbital ATK in 2018, an erstwhile industry leader in providing missile components across the air, sea and land-based systems.

Northrop reported first-quarter 2022 earnings of $6.10 per share, which surpassed the Zacks Consensus Estimate by 2.5%. NOC boasts a long-term earnings growth rate of 6.1%.

Lockheed’s 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 as well as the Terminal High Altitude Area Defense missile.

Lockheed’s first-quarter 2022 adjusted earnings of $6.44 per share surpassed the Zacks Consensus Estimate by 3.5%. LMT boasts a long-term earnings growth rate of 5.7%.

General Dynamics’ 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’ first-quarter 2022 earnings of $2.61 per share from continuing operations surpassed the Zacks Consensus Estimate by 4.8%.  GD boasts a long-term earnings growth rate of 9.8%.

Price Movement

In the past year, Raytheon Technologies’ shares have gained 6.8% against the industry’s 1.4% decline.

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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