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Raytheon (RTX) Wins $234M Deal to Support OTH-WS Program

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Raytheon Technologies Corp.’s (RTX - Free Report) business segment, Missiles & Defense, recently secured a modification contract for the Over-the-Horizon Weapon System (OTH-WS). The award has been provided by the Naval Sea Systems Command, Washington Navy Yard, Washington, D.C.

Valued at $234.1 million, the contract is expected to be completed by March 2027. A major portion of the work related to this deal will be carried out in Kongsberg, Norway.

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 program 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 aforementioned 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 combat 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 signifies strong prospects for Raytheon Technologies to win more orders in the missile segment. The company’s 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.

The company has a long-term earnings growth of 3.5%. The Zacks Consensus Estimate for NOC’s 2023 sales indicates an improvement of 4.6% from the year-ago reported figure.

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 and the Terminal High Altitude Area Defense missile.

The company’s long-term earnings growth is pegged at 6.9%. Its shares have returned 12.7% value to its 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.

The company boasts a long-term earnings growth of 9.8%. Its shares have appreciated 19.9% in the past year.

Price Movement

In the past six months, shares of Raytheon Technologies have rallied 19.2% compared with the industry’s 20.6% growth.

Zacks Investment Research
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Zacks Rank

Raytheon 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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