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Raytheon (RTX) Secures 103M Deal for the OTH-WS Program

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Raytheon Technologies Corp.’s (RTX - Free Report) Missiles and Defense unit recently clinched a modification contract to manufacture and deliver the Over-the-Horizon Weapon System (OTH-WS). The Naval Sea Systems Command, Washington, D.C. awarded the deal.

Details of the Deal

Valued at $102.7 million, this contract is scheduled to be completed by May 2024.

The majority of work related to this deal will be carried out in Kongsberg, Norway, with a few portions allocated at multiple locations across the United States.

Significance of OTH-WS

The OTH-WS program is a long-range, surface-to-surface warfare system intended to engage maritime targets, both inside and beyond the radar horizon. The system consists of an operator interface console, the Naval Strike Missile and the Missile Launching System.

The OTH-WS receives the targeting data via tactical communications from combatant platforms or airborne sensors and requires no guidance after launch.

Due to its remarkable features that can effectively assist in military operations, Raytheon Technologies continues to witness a steady inflow of orders involving the OTH-WS program. The latest contract win is a testament to that. This, in turn, is expected to boost RTX’s missiles and defense business unit revenues from the OTH-WS arena.

Prospects for Raytheon Technologies

Nations are strengthening their defense capabilities amid the rising geopolitical tension. In this context, missiles form an integral part of any nation’s defense strategy. To this end, the demand for missiles is likely to increase manifold as countries hunt for an effective and technologically advanced missile system.

Per the report from Mordor Intelligence, the global missiles and missile defense systems market is anticipated to witness a CAGR of 8% during the 2022-2031 period. This entails strong prospects for Raytheon Technologies to win more orders in the missile segment as its Missiles & Defense business unit remains a leading designer, developer, integrator, producer and sustainer of integrated air and missile defense systems.

Benefits for Peers

Considering the aforementioned growth prospects, defense majors that stand to benefit from the expanding size of the missiles market are:

Northrop Grumman (NOC - Free Report) 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 22.3% in the past year.

Lockheed Martin’s (LMT - Free Report) 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 Martin’s long-term earnings growth rate is pegged at 5.7%. Shares of LMT have returned 12.7% value to investors in the past year.

General Dynamics’ (GD - Free Report) 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 19.9% in the past year.

Price Movement

In the past year, shares of Raytheon Technologies have rallied 8.7% compared with the industry’s growth of 2.5%.

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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.