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Raytheon Wins Navy Deal to Procure 32 Tomahawk Missiles

Zacks Equity Research

Raytheon Technologies Corporation’s RTX Missile Systems unit recently secured a contract for procuring 32 Tomahawk mid-body range safety subsystems along with 32 flight test kits. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Valued at $30.3 million, the contract is scheduled to be completed by March 2023. The majority of work related to this deal will be executed in Tucson, AZ; Bristol, PA and Westminster, CO.

Advantages of the Tomahawk Cruise Missile

Raytheon's Tomahawk subsonic cruise missile is used for deep land attack warfare, designed to fly at extremely low altitudes at high subsonic speeds and piloted over an evasive route by several mission-tailored guidance systems. The Naval Strike Missile is a long-range, precision strike weapon that can find and destroy ships at distances of up to 100 nautical miles away. A major improvement to Tomahawk is network-centric warfare capabilities, using data from multiple sensors such as aircraft, UAVs, satellites, foot soldiers, tanks and ships to find its target. It will also be able to send data from its sensors to these platforms.

Raytheon also plans on adding navigation and communication upgrades to all Tomahawk Block IV missile variants to extend their service life by another 15 years.

What Aids Raytheon?

Increasing geopolitical tensions across the globe have prompted nations to strengthen their defense systems manifold, especially missile defense systems. To reap the benefits of this situation, Raytheon has started focusing on the modernization of its Tomahawk Missiles.

Going forward, Tomahawk missiles will be upgraded with enhanced maritime strike capabilities. Moreover, these missiles are already integrated with the vertical launch system (VLS) for U.S. Navy ships, without any costly delays. Such upgrades are expected to drive demand for these missiles and other associated services globally. This, in turn, is projected to usher in more contracts for the company.

Interestingly, the fiscal 2020 U.S. defense budget includes a spending plan of $13.6 billion for varied missile defense programs. The aforementioned developments along with the favorable budget allocation are expected to benefit various missile makers like Raytheon.

Price Performance

Shares of the company have lost 28.4% in the past month compared with the industry’s decline of 14.3%.


Zacks Rank &Stocks to Consider    

Raytheon currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the same space are AeroVironment, Inc. AVAV, Moog Inc. MOG.A and Elbit Systems Ltd ESLT. While AeroVironment sports a Zacks Rank #1 (Strong Buy), Moog and Elbit Systems hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AeroVironment came up with average positive earnings surprise of 5.72% in the last four quarters. The Zacks Consensus Estimate for fiscal 2020 earnings indicates year-over-year improvement of 1.7%.

Moog pulled off average positive earnings surprise of 4.76% for the trailing four quarters. The Zacks Consensus Estimate for fiscal 2020 earnings indicates annual improvement of 8.6%.

Elbit Systems pulled off positive earnings surprise of 11.26% in the last reported quarter. The Zacks Consensus Estimate for 2020 earnings indicates annual improvement of 12.7%.

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