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RTX Secures a $225M Navy Contract to Aid Radar Production

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RTX Corp.’s (RTX - Free Report) Missiles & Defense unit recently clinched a modification contract involving radars. The award has been offered by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Valued at $225.3 million, the contract is expected to be completed by November 2024. Per the terms of the deal, RTX will provide integration and production support for Air and Missile Defense Radar and Enterprise Air Surveillance Radar.

A major portion of the work related to this deal will be carried out in Marlborough, MA. 

Radars & RTX

With the rapid escalation of geopolitical tensions globally in recent times, developed as well as developing nations have been boosting their defense arsenal significantly. Radars constitute a vital part of their defense equipment. While radars have been in use since World War II for locating threats and targets, they are being used today for multiple purposes like ground surveillance, missile control, fire control, air traffic control, moving target indication, weapons location and vehicle search.

Demand for military radar systems has expanded manifold in recent times, driven by factors like a rise in defense spending of emerging economies, an increase in regional tensions and inter-country conflicts that have increased threats from missiles and aircraft. These, in turn, have been benefiting radar manufacturing companies like RTX in the form of contract wins like the latest one.

Notably, RTX’s product portfolio consists of varied radars like integrated air and missile defense radars, ballistic missile radars, surveillance radars and air dominance radars. Radars like AN-SPY 6, AN-TPY-2, APG-79 and APG-82 are some of the company’s combat-proven products that enjoy solid demand in the global military radar market.

Growth Prospects

Amid the invasion of Russia in Ukraine in the recent past, as well as the ongoing hostile conflict in the Middle East, nations across the globe can be expected to have strengthened their surveillance system to avoid any unprecedented attack. Consequently, it is reasonable to expect that the demand for an effective radar system, which boasts the features of next-generation technology-based warfare capabilities, will gain further momentum in the coming days due to the growing importance of radars in military surveillance.

To this end, the Fortune Business Insights firm projects the global military radar market to reach $22.1 billion by 2028 at a CAGR of 6.3% from 2021. Such growth projections should benefit RTX and other prominent radar manufacturers like Northrop Grumman (NOC - Free Report) , Lockheed Martin (LMT - Free Report) and L3Harris Technologies (LHX - Free Report) .

Northrop’s radar solutions provide total surveillance for air and missile defense as well as air traffic control. Its diverse product portfolio includes a handful of radars like the F-35 fire control radar and Distributed Aperture System, the LONGBOW Fire Control Radar, the Scalable Agile Beam Radar, the APR-39 DV(2), the EV(2) Radar Warning Receiver programs and a few more.

NOC boasts a long-term earnings growth rate of 2.4%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 6.6% from the 2022 reported figure.

Lockheed Martin’s radars are designed with the highest degree of commonality and fully integrated systems. These radars can operate in all environments, are available in highly mobile configurations and can be deployed worldwide. Its portfolio of radars includes the AN/APY-9 radar, the IRST21 Sensos system, AN/TPQ-53 radar systems, SPY-7, the long-range discrimination radar and a few more.

LMT boasts a long-term earnings growth rate of 8.6%. The stock has a four-quarter average earnings surprise of 4.35%.

L3Harris manufactures a handful of combat-proven radars like the SPS-48, land-based surveillance radars, the AN/APY-11 Multimode radar, the Tactical Air Surveillance radar, the AN/SPS-48G Long-range 3D surveillance radar and many more.

L3 Harris boasts a long-term earnings growth rate of 3.6%. The Zacks Consensus Estimate for its 2023 sales indicates an improvement of 12.6% from the 2022 reported figure.

Price Performance

In the past year, RTX’s shares have lost 19.3% compared with the industry’s 14.2% decline.

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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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