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RTX Wins Contract to Support Rolling Airframe Missile Program

RTX Corp. RTX recently clinched a modification contract involving the supply of spare parts for its Rolling Airframe Missile (RAM). The award has been provided by the Naval Sea Systems Command, Washington, D.C.

Details of the Deal

Valued at $33.8 million, the contract is expected to be completed by February 2027. Per the terms of the deal, RTX is going to provide Mod 5 Guided Missile Launching System (GMLS) requirements and spares for its RAM program.

A major portion of the work related to this deal will be carried out in Ottobrunn, Germany. The contract will serve the U.S. Navy and German government.

What’s Favoring RTX?

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 RTX a prominent U.S. missile maker, the increased missile defense adoption by nations provides the company with solid order flows. The latest contract win is a bright example of that.

Notably, RTX’s RAM-guided missile weapon system is the world's most modern ship self-defense weapon, designed to provide exceptional protection for ships of all sizes.  RAM missiles are deployed via the MK49 RAM GMLS and the MK15 Mod 32 SeaRAM Close-In Weapon System on more than 100 ships, ranging from fast patrol boats to aircraft carriers.

RAM is currently deployed on more than 165 ships in 11 countries, ranging from 500-ton fast-attack crafts to 95,000-ton aircraft carriers. Moreover, the RAM weapon system is a cooperative program between the U.S. and German governments with industry support from RTX and RAMSYS of Germany.

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The aforementioned discussion reflects the solid demand that RTX’s RAM enjoys in the missile defense space, both in the United States and abroad. Considering this, we may expect RTX to win more contracts involving its RAM, like the latest one. This, in turn, is expected to bolster RTX’s revenues in the coming quarters.

Growth Prospects

The global peace index reflects an unstable environment worldwide, with the Russia-Ukraine war continuing for more than two years now, in addition to the ongoing hostility in different parts of the Middle East. This has set the stage for the defense sector to witness rising demand for military products, particularly missiles, as nations worldwide strive to protect their borders from unprecedented attacks.

Therefore, the growth prospect for the global missile and missile defense systems market remains solid. To this end, the Mordor Intelligence firm projects the market to witness a CAGR of 5% over the 2024-2029 period.

Such growth projections should bode well for RTX, which is one of the primary missile makers across the globe. Its varied missile portfolio includes Standard Missile (SM)-2, SM-6, Tomahawk Missile, AMRAAM Missile and a few more missiles. To keep up with its growing demand for a wide variety of missiles, RTX broke ground on a $115 million, 26,000-square-foot expansion of its Redstone Raytheon Missile Integration Facility in April 2024. This expansion should increase the factory's space for integrating and delivering on critical defense programs by more than 50%.

This facility expansion can be expected to enable RTX to expand its footprint further in the missile and missile defense systems market through an increased missile production rate.

Opportunities for Peers

RTX apart, other defense contractors that are expected to benefit from the missile and missile defense systems market’s growth are discussed below:

Northrop Grumman NOC: Northrop is a prominent developer of missile systems and counter systems, including strategic deterrents, as well as subsystems and components. Its product portfolio includes the Integrated Air and Missile Defense Battle Command System, the Guided Multiple Launch Rocket System propulsion and warhead subsystems, the Hypersonic Attack Cruise Missile, the Advanced Anti-Radiation Guided Missile and a few other combat-proven products that support missile defense systems.

NOC boasts a long-term earnings growth rate of 8.7%. The Zacks Consensus Estimate for Northrop’s 2024 sales indicates an improvement of 4.6% from the 2023 reported figure.

Lockheed Martin LMT: Lockheed’s Missiles and Fire Control business unit develops, manufactures and supports advanced combat missiles and rockets for military customers, including the U.S. Army, Navy, Air Force, Marine Corps, NASA and dozens of foreign allies. Some of its prominent products are the PAC-3 missile and the Terminal High Altitude Area Defense missile.

LMT boasts a long-term earnings growth rate of 4.1%. The Zacks Consensus Estimate for Lockheed’s 2024 sales indicates an improvement of 3.2% from the 2023 reported figure.

General Dynamics GD: General Dynamics’ Ordnance and Tactical Systems unit is the system integrator of the 2.75-inch Hydra-70 family of rockets. It also produces composite rocket motor cases and launch tubes for tactical and strategic missiles.

GD boasts a long-term earnings growth rate of 12%. The Zacks Consensus Estimate for General Dynamics’ 2024 sales indicates growth of 10.5% from the 2023 reported figure.

Price Performance

In the past year, RTX’s shares have rallied 13.2% against the industry’s 9.8% 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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