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RTX Secures Contract to Support Standard Missiles-2 and 6

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RTX Corporation (RTX - Free Report) recently clinched a contract to provide engineering and technical support for Standard Missiles-2 (SM-2) and 6. The award has been offered by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Valued at $74.8 million, the contract is projected to be completed by September 2024. On all options, included in this contract, being exercised, work for this deal will continue through September 2028.  

Majority of the work related to this contract will be executed in Tucson, AZ. The contract involves Foreign Military Sales to Canada, Australia, Japan and Denmark.

How Will the Deal Favor RTX?

The increasing geopolitical tensions worldwide have prompted nations to strengthen their defense systems manifold. With rapid technological upgrades, missile defense has steadily become pivotal in a nation’s defense strategy. With the United States being the world’s largest weapon supplier and RTX being a prominent U.S. missile maker, the increased missile defense adoption by nations provides the company with solid growth opportunities.

To this end, it is imperative to mention that RTX’s SM-2 has an extensive flight test history, with more than 2,700 successful live firings. On the other hand, the SM-6 is deployable on 60 surface ships, and the company has already delivered more than 500 missiles to the U.S. Navy.

Undoubtedly, this statistic reflects the solid demand that these missiles enjoy in the defense space. The latest contract win is a further testament to that. Such contract wins are expected to boost RTX’s top line in the coming quarters.

Prospects for RTX

The recent turbulence between Russia and Ukraine has led nations to strengthen their warfare capabilities to deter any warfare-like situation and repel any sudden assault. In this context, the demand for missiles may increase manifold as these have the immense destructive power to support military operations efficiently.

Looking ahead, per a report from the Markets and Markets firm, the global rockets and missile market is anticipated to witness a CAGR of 6.1% during the 2023-2028 period. This should benefit RTX, which enjoys an extensive missile portfolio containing AIM-9X Sidewinder, SM-6, SM-3 interceptor, TOW missiles along with a few more, thereby boasting strong demand in the missile market.

Benefits for Peers

Considering the expanding size of the market, other defense behemoths that stand to benefit from the rewarding missile market have been discussed below.

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 the 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 3.7%. The Zacks Consensus Estimate for NOC’s 2023 sales indicates an improvement of 5.8% from the 2022 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.

Lockheed Martin’s long-term earnings growth rate is 8.4%. The consensus estimate for LMT’s 2023 sales indicates an improvement of 1% from the 2022 reported figure.

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 9.2%. The consensus mark for GD’s 2023 sales indicates an improvement of 7.8% from the previous year’s reported number.

Price Movement

In the past year, shares of RTX have lost 17.4% compared with the industry’s decline of 6.6%.

Zacks Investment Research
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Zacks Rank

RTX carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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