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RTX Clinches a $250M Deal From MELCO to Produce ESSM Block 2

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Key Takeaways

  • RTX secured a $250M deal from MELCO to provide ESSM Block II kits, parts and tech support in Japan.
  • The deal supports Japan's goal to boost local missile production and defense capabilities.
  • RTX's ESSM Block 2 offers enhanced mobility, dual-mode guidance and software-driven threat adaptation.

RTX Corporation’s (RTX - Free Report) business segment, Raytheon, recently won a $250 million deal from Japan's Mitsubishi Electric Corporation (“MELCO”) to produce Evolved Seasparrow Missile (ESSM) Block 2.

Per the terms of the Direct Commercial Sale deal, Raytheon will supply missile kits, parts and components as well as technical support for missile production at MELCO in Japan. The deal will help Japan to improve its domestic defense manufacturing and missile defense capabilities.

Following the news release, the company's share price rose 0.58% to reach $142.67 on Thursday.

RTX’s Leadership in Cutting-Edge Missile Systems

Rapidly escalating geopolitical tensions and intensified regional conflicts in numerous parts of the world have prompted countries to increase their defense capabilities. Since missiles make up a large component of a country's defense arsenal, nations are heavily investing in modern missile systems for defense and deterrence. This is likely to have prompted the Mordor Intelligence firm to forecast a CAGR of 5% for the global missiles and missile defense systems market during the 2025-2030 time period.

RTX excels in missile defense systems owing to its innovative technology, which includes sensors, radars and interceptors. Its global relationships and constant creativity solidify its leadership in providing effective, multi-layered missile defense solutions around the world. As a leading manufacturer of missile systems, the company has received a constant flow of orders from the Pentagon and other U.S. allies.

RTX's ESSM Block 2 is a short- to medium-range, ship-launched, dual-mode guided missile with better mobility and performance than its Block 1 counterpart. The newest variant reduces reliance on shipboard illumination and is integrated into a wide range of combat systems and launchers, offering improved performance in demanding marine conditions. It also has a significant digital processing margin to keep up with evolving threats via software improvements.

The company's product portfolio includes several combat-proven missiles, including the SM-6 Missile, Patriot Guidance Enhanced Missile, National Advanced Surface-to-Air Missile System, Stinger Missile, Tomahawk Cruise Missile, AIM-9X Sidewinder Missile and a few more.

Opportunities for Other Defense Stocks

Other defense companies with proven expertise in manufacturing advanced missiles and missile defense systems are discussed below:

The Boeing Company (BA - Free Report) : For nearly 25 years, the company has been supplying air and missile defense systems to the United States, its allies and international partners. The company’s offerings include the Avenger, Aegis Ballistic Missile Defense and Ground-Based Midcourse Defense.

Boeing boasts long-term (three to five years) earnings growth rate of 18.1%. The Zacks Consensus Estimate for BA’s 2025 sales implies growth of 25.6%.

Northrop Grumman Corp. (NOC - Free Report) : The company offers high-speed, long-range strike weapons like the AARGM-ER, which is a supersonic, air-launched tactical missile system. It also develops and produces warheads, fuses, advanced high-speed propulsion systems and other missile components.

Northrop has a long-term earnings growth rate of 3.3%. The Zacks Consensus Estimate for NOC’s 2025 sales indicates growth of 2.8%.

Lockheed Martin Corp. (LMT - Free Report) : The company’s Missiles and Fire Control business unit develops, manufactures and supports advanced missiles and rockets. Some of its renowned products are the PAC-3 family of missiles, the Multiple Launch Rocket System, the Precision Strike Missile, the Terminal High Altitude Area Defense and a few more.

Lockheed has long-term earnings growth rate of 10.5%. The Zacks Consensus Estimate for LMT’s 2025 sales indicates growth of 4.7%.

RTX Stock Price Movement

In the past six months, RTX shares have risen 23.8% compared with the industry’s growth of 18.2%.

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RTX’s Zacks Rank

RTX 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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