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RTX Secures $163M Contract to Aid F135 Propulsion Systems

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RTX Corporation’s (RTX - Free Report) Pratt and Whitney business unit recently clinched a modification contract involving F135 propulsion systems. The award has been offered by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $163.3 million, the contract is expected to be completed by December 2025. Per the terms of the deal, RTX will procure spare engines, power modules, special test equipment and special tooling to support F135 propulsion systems from the 17th lot, for the F-35 Lighting II Joint Strike Fighter aircraft.

The contract will serve the U.S. Air Force, Marine Corps, Navy, non-U.S. Department of Defense participants, cooperative program partners and Foreign Military Sales (FMS) customers.

Work related to this deal will be carried out in various locations within the continental U.S.

RTX’s Growth Prospects

Combat aircraft witnessed a surge in demand with the rapid rise in political risks and global terrorism. In this context, F-35 jets, built by America’s largest defense contractor, Lockheed Martin (LMT - Free Report) , enjoy a lucrative position in the combat aircraft arena. These jets also witness a steady flow of orders from the U.S. Army, seven international partner countries and eight FMS customers.

Lockheed has delivered 944 F-35 airplanes since the program's inception, with 421 jets in the backlog as of Jun 25, 2023.  This reflects the solid demand that this jet program enjoys in the defense space, resulting in multiple order wins for both LMT and RTX. The latest contract win is a bright example of that.

The production of F-35 jets is expected to continue for several years, given the U.S. government's current inventory target of 2,456 aircraft for the Air Force, Marine Corps and Navy.

Consequently, Pratt & Whitney, which builds F-35’s engine, is likely to witness more order inflows for the F-35 engine and its propulsion system in the coming days, like the latest one. This should significantly bolster RTX’s top line.

Peer Growth

Apart from Lockheed and RTX, defense majors that stand to benefit from the expanding production rates of F-35 have been discussed below.

Northrop Grumman (NOC - Free Report) : The company renders its expertise in carrier aircraft and low-observable stealth technology for the F-35 program. A pioneer in the development of manned combat aircraft, NOC has a tradition of providing technological leadership in all aspects of military aviation and aircraft.

Northrop Grumman has a long-term earnings growth rate of 4.1%. The Zacks Consensus Estimate for NOC’s 2023 sales indicates a year-over-year improvement of 5.7%.

BAE Systems (BAESY - Free Report) : This defense major’s short takeoff and vertical landing experience, along with air systems sustainment, supports F-35’s combat capabilities. The company provides an electronic warfare suite for F-35, which includes fully integrated radar warning (targeting support and self-protection) to detect and defeat surface and airborne threats.

BAE Systems boasts a long-term earnings growth rate of 14%. The Zacks Consensus Estimate for BAESY’s 2023 sales indicates an increase of 33.6% from the previous year’s reported figure.

Price Movement

In the past year, shares of RTX have lost 10.7% compared with the industry’s decline of 4.7%.

Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Rank

RTX 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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