Raytheon (RTX) Wins Agreement to Support F-135 Propulsion System – July 5, 2022

Raytheon Technologies Corp.it is (RTX Free Report), the Pratt & Whitney business segment, recently won a contract for the F-135 propulsion system. The award was donated by Naval Air Systems Command, Patuxent River, MD.

Agreement Details

Worth $69 million, the contract is expected to be completed by December 2025. Under the terms, Raytheon will provide one-time engineering for the early identification, development and qualification of fixes to potential and actual operational issues. of the F-135’s propulsion system.

With this order, Raytheon will also ensure the continued maturation of the engine; evaluate component life limits based on operational experience; improve operational readiness; as well as reduce maintenance and engine life cycle costs to support the F-35 Lightning II program.

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 beyond 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. As the F-35 is 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, worth $632 million and another 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.

In addition to Lockheed and Raytheon, which benefit from the strong F-35 production focus, Northrop Grumman (NOC free report) and BAE Systems Plc (BAESY Free Report) are also poised to win as they are both 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.

Currently, Northrop has a long-term earnings growth rate of 6.1%. Zacks’ consensus estimate for NOC sales in 2022 indicates a growth of 2.6% over the figure reported in 2021.

BAE Systems’ short takeoff and vertical landing experience and aerial systems sustainment support the F-35’s combat capabilities. The company provides an electronic warfare suite for the F-35, featuring fully integrated radar warning, targeting support and self-protection to detect and defeat surface and airborne threats.

BAE Systems is posting a strong long-term earnings growth rate of 8.9%. Zacks consensus estimate for BAESY’s sales in 2022 indicates a growth of 20.4% over the figure published in 2021.

Price Movement and Zacks Ranking

Shares of Raytheon have gained 11.9% over the past year against a 2.3% 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.

Comments are closed.