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Raytheon's (RTX) Unit Wins $50M Deal for MK-31 Guided Missile

Raytheon Technologies Corp.’s RTX business unit, Missiles and Defense, recently clinched a modification contract involving the MK-31 Guided Missile program. The award has been offered by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Valued at $50.1 million, the contract is expected to get completed by July 2023. Per the terms of the agreement, Raytheon will offer a design agent and engineering support services for the Rolling Airframe Missile-upgraded MK-31 Guided Missile Weapon System Improvement Program.

The work related to this deal will be executed in Tucson, AZ.

How Will the Deal Favor Raytheon?

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 Raytheon being a prominent U.S. missile maker, the increased missile defense adoption by nations offers the company solid growth opportunities.

Raytheon’s MK-31 weapon system is the most modern self-defense weapon system, deployed from ships to destroy anti-ship missiles, and has the capability to protect ships of all sizes. With these advanced weaponries in its portfolio, Raytheon enjoys solid demand in the defense space. The latest contract win is an instance of that. This, in turn, is expected to boost the company’s top line in the coming quarters.

Looking Ahead

Per a report by the Allied Market Research firm, the global rocket and missile market is projected to expand at a CAGR of 4.2% during the 2022-2031 period to reach $82 million by 2031. Such massive growth projections indicate solid opportunities for Raytheon Technologies, Northrop Grumman NOC, Lockheed Martin LMT and Boeing BA, which specialize in developing technologically advanced missiles.

Lockheed Martin’s missile defense program includes the Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense air and missile defense programs. It also manufactures the Multiple Launch Rocket System, Joint Air-to-Surface Standoff Missile and Javelin tactical missile programs alongside other tactical missiles.

Lockheed boasts a four-quarter average earnings surprise of 64.46%. The stock has a long-term earnings growth rate of 5.4%.

Likewise, Boeing’s Integrated Air & Missile Defense portfolio includes Arrow 3, which offers regional missile defense capabilities to enable an effective response to short and medium-range ballistic missiles.

The Zacks Consensus Estimate for Boeing’s 2022 sales suggests an improvement of 14.8% over 2021’s reported figure. The stock has a long-term earnings growth rate of 4%.

Similarly, Northrop Grumman’s missile defense program includes AGM-88E advanced anti-radiation guided missiles, the Ground Based Strategic Deterrent weapon system and rocket propulsion systems.

Northrop boasts a four-quarter average earnings surprise of 3.92%. The stock has a long-term earnings growth rate of 2.2%.

Price Performance

In the past year, Raytheon Technologies’ shares have rallied 13.9% compared with the industry’s 9.9% growth.

Image Source: Zacks Investment Research

Zacks Rank

Raytheon Technologies 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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