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Raytheon (RTX) Wins Contract for F-135 Propulsion Systems

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Raytheon Technologies Corp.’s (RTX - Free Report) business segment, Pratt & Whitney, recently secured a modification contract to support the production of Lot 14 F-135 Propulsion Systems. The award has been offered by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $14.7 million, the contract is expected to be completed by October 2023. Per the terms of the deal, Raytheon will provide tooling equipment to support the production of Lot 14 F-135 Propulsion Systems.

The contract will cater to the U.S. Air Force, Navy, Marine Corps and non-U.S. Department of Defense (DOD) participants. A major part of the work related to this deal will be carried out in LaPorte, IN; Syracuse, NY and Oxford, AL.

F-35 & Pratt and Whitney

Over the past decade, a rapid rise in global terrorism and adverse geopolitical situations across borders have boosted demand for defense products, with combat aircraft constituting a major portion of that portfolio.

It is imperative to mention that the F-35 jets built by America’s largest defense contractor, Lockheed Martin (LMT - Free Report) enjoy a dominant position in the combat jet market. With F-35 being one of the top-notch stealth aircraft, Lockheed enjoys a consistent inflow of contracts for the production, delivery of associated spare parts and other deals concerning the F-35 jet program.

For instance, in August 2022, the company won a significant contract worth $7.6 billion to procure a total of 129 F-35 aircraft, ranging from F-35A to F-35C variations. Such contract wins by Lockheed also benefit Pratt and Whitney, which supplies the F135 engine that powers all three variants of the F-35 fighter jets.

Therefore, as the F-35 jet continues to dominate the combat aircraft market, Pratt & Whitney stands to benefit from order flow. The latest contract win is an example of that.

Growth Prospects

The production of F-35 jets is expected to continue for many years, given the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps. and Navy. Consequently, Pratt and Whitney is expected to witness more order inflows involving the F-35 program, like the latest one, which should bolster Raytheon Technologies’ top line.

Besides Lockheed and Raytheon, Northrop Grumman (NOC - Free Report) and BAE Systems Plc (BAESY - Free Report) are also poised to gain from the solid production target for F-35, as both of them are key partners in the F-35 program.

Northrop renders its expertise in carrier aircraft and low-observable stealth technology for the F-35 program. Being 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.

Currently Northrop boasts a long-term earnings growth rate of 2.2%. The Zacks Consensus Estimate for NOC’s 2022 sales indicates growth of 1.9% from the 2021 reported figure.

BAE Systems’ 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, including a fully integrated radar warning, targeting support and self-protection to detect and defeat surface and airborne threats.

BAE Systems has a solid long-term earnings growth rate of 9.3%. The Zacks Consensus Estimate for BAESY’s 2022 sales indicates growth of 24.2% from 2021’s reported figure.

Price Movement and Zacks Rank

Raytheon’s shares have lost 6.6% in the past year compared with the industry’s decline of 11%.

Zacks Investment Research
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The company currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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