TUCSON, Ariz. - Raytheon (NYSE:RTN), a business unit of RTX (NYSE: RTX), has been awarded contracts totaling $676 million for the continued production of the TOW® weapon system for the U.S. Army. The contracts include a $430 million annual production agreement for fiscal year 2023 and an additional award of $246 million for 2024.
The TOW (tube-launched, optically-tracked, wireless-guided) missile system, which has been a staple in the U.S. and allied forces' arsenals, is expected to remain in service beyond 2050. Tom Laliberty, president of Land and Air Defense Systems at Raytheon, stated that their production line is capable of manufacturing up to 10,000 missiles annually to meet the demands of the U.S. Army, Marine Corps, and allied land forces worldwide.
Raytheon has enhanced the TOW system with modernized fuzing and target detection capabilities, as demonstrated in recent successful Fly-To-Buy lot acceptance tests of the TOW 2B variant. These updates aim to provide the warfighter with unmatched capability and the fastest target engagement time in its class, especially during complex urban operations.
The missile's design and packaging improvements are also intended to address military environmental requirements and logistical challenges. Raytheon has delivered over 700,000 TOW weapon systems globally and notes its extensive use in combat, including 11,000 times since 2003 and the provision of approximately 13,000 TOW missiles to Ukraine by the Department of Defense.
Compatible with both manned and unmanned platforms, the TOW missile can be deployed on various vehicles such as the High Mobility Multipurpose Wheeled Vehicle, Stryker (NYSE:SYK), Bradley Fighting Vehicle, and numerous light armored vehicles. The contract work will be conducted in Tucson, Arizona.
Raytheon is recognized as a leading provider of defense solutions, supporting the U.S. government, allies, and partners. RTX, with 2023 sales of $69 billion and over 185,000 employees worldwide, continues to advance technology in defense and aerospace sectors. This information is based on a press release statement.
In other recent news, RTX Corp. has made significant strides in its financial performance. The company reported robust third-quarter earnings, exceeding expectations with an impressive revenue growth and improved segment margins. The adjusted earnings per share (EPS) for the quarter was $1.45, approximately 8% higher than consensus estimates. This positive outcome led to an upward adjustment of the full-year 2024 EPS guidance to $5.54.
Several analysts have responded positively to these developments. TD Cowen, for one, maintained a Buy rating on RTX Corp. shares, citing strong defense orders and a promising book-to-bill ratio. Similarly, Susquehanna reaffirmed its Positive rating and increased the price target to $150.00, while RBC Capital Markets adjusted its price target for RTX Corp. to $130.00. UBS also raised its price target for RTX Corp. to $133.00, acknowledging robust growth in the military sector.
However, Goldman Sachs maintained a Neutral rating, expressing concerns over the Collins division's margin, defense market exposure, and uncertainties surrounding the Geared Turbofan engine. Despite these concerns, RTX Corp.'s strong quarterly results have been attributed to robust demand in both the commercial original equipment manufacturer (OEM) and aftermarket sectors, as well as in the Defense sector. The company's backlog has also seen significant growth, now standing at $221 billion, indicating a promising outlook for its sustained growth in earnings and free cash flow.
InvestingPro Insights
Raytheon's recent $676 million contract for the TOW weapon system aligns with several positive trends highlighted by InvestingPro data. The company's revenue growth of 17.82% over the last twelve months and a substantial 49.21% quarterly growth suggest strong demand for its defense products. This robust performance is reflected in RTX's stock price, which has seen a remarkable 76.04% total return over the past year.
InvestingPro Tips indicate that RTX is a prominent player in the Aerospace & Defense industry, which is evident from its continued production of the long-standing TOW missile system. The company's ability to secure large contracts and maintain its position as a leading defense provider is likely contributing to analyst expectations of profitability this year.
Moreover, RTX has demonstrated a commitment to shareholder value, having raised its dividend for 3 consecutive years and maintaining dividend payments for an impressive 54 consecutive years. This financial stability, combined with the company's strong market position, may explain why the stock is trading near its 52-week high.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for RTX, providing deeper insights into the company's financial health and market position.
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