Raytheon (RTX) Wins $408 Million Contract to Help F135 Propulsion System – May 31, 2022

Raytheon Technologies Corp.it is (RTX Free Report), the Pratt & Whitney business unit, recently entered into a modification contract involving the F135 propulsion system. Naval Air Systems Command, Patuxent River, MD, donated the award.

Agreement details

Worth $408.4 million, this contract is expected to be completed by November 2022. Under the terms of the agreement, Pratt & Whitney will provide annual support for the F135 propulsion system, including maintenance of support equipment and unique maintenance services for conventional takeoff. and landing/carrier (F-35A and F-35C) and short take-off and landing (F-35B) variants.

The majority of work related to this agreement will be performed in East Hartford, CT.

F-35 & Pratt and Whitney

Over the past decade, a rapid rise in global terrorism and unfavorable geopolitical situations across borders have driven demand for defense products, with combat aircraft making up a significant portion of this portfolio.

It is imperative to mention that the F-35 jets built by America’s largest defense contractor, Lockheed Martin (LMT Free Report), enjoy a dominant position in the combat aircraft market. With the F-35 being one of the premier stealth aircraft, Lockheed enjoys a steady influx of contracts for production, delivery of associated spare parts, and other agreements regarding the F-35 jet program.

For example, in May 2022, the company won two major contracts, one worth $632 million and the other worth $398 million, to support the F-35 program. Such contracts won by Lockheed also benefit Pratt and Whitney, which supplies the F135 engine that powers the three variants of the F-35 fighter jets.

Therefore, as the F-35 jet continues to dominate the fighter jet market, Pratt & Whitney should benefit from the flow of orders. The latest contract victory is an example of this.

Growth prospects

F-35 jet production is expected to continue for many years, given the current U.S. government inventory target of 2,456 aircraft for the Air Force, Marine Corps. and Navy. As a result, Pratt and Whitney should see more incoming orders for the F-35 program like the latest, which should boost Raytheon Technologies’ revenue.

Not only do Lockheed and Raytheon benefit from the strong F-35 production focus, but also Northrop Grumman (NOC free report) and BAE Systems Plc (BAESY Free Report) since both are key partners in the F-35 program.

Northrop brings its expertise in carrier aircraft and low-observability stealth technology to the F-35 program. As a pioneer in the development of manned combat aircraft, Northrop has a tradition of providing technological leadership in all aspects of aviation and military aircraft.

Northrop is posting a long-term earnings growth rate of 6.1%. Zacks’ consensus estimate for NOC sales in 2022 indicates growth of 2.7% from the figure published in 2021.

BAE Systems’ short takeoff and vertical landing experience, as well as aerial systems sustainment, support the 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 has a strong long-term earnings growth rate estimate of 7.2%. Zacks’ consensus estimate for BAESY’s sales in 2022 indicates a 35% growth from the figure published in 2021.

Price Movement and Zacks Ranking

Shares of Raytheon have gained 9% in the past year against a 0.4% decline in the sector.

Image source: Zacks Investment Research

The company currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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