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Raytheon-Lockheed JV Wins $75M Deal for Javelin Missiles

Javelin, a joint venture (JV) of Raytheon Technologies Corp. RTX and Lockheed Martin Corp. LMT, recently won a contract for Javelin weapon system full-rate production primary deliverables. Work related to the deal is scheduled to be completed by Aug 31, 2023.

Valued at $75.4 million, the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL.

The entire task will be carried out in Tuscon, AZ.

A Brief Note on Javelin

Javelin is the world's first one-man-portable, fire-and-forget, multipurpose missile system. This compact and lightweight missile was designed for one-soldier operations in all situations. It enhances direct-fire capability against armored vehicles, buildings and field fortifications. Armed forces all over the world have adopted Javelin.

This combat-proven weapon system boasts a reliability rate of more than 94%.It can be deployed from multiple platforms and used in all weather, day or night operations.

Our View

While Raytheon is one of the well-positioned large-cap defense players in the United States, Lockheed Martin is the nation’s largest defense contractor. Both the companies are renowned missile makers in the United States.

With increasing demand for missile defense systems owing to a rise in worldwide geopolitical tensions, both these companies are witnessing notable contract flow from the Pentagon. The latest contract win is an instance of that, with Javelin being the preferred choice of the U.S. Army, Marine Corps and almost 15 allied militaries.

Furthermore, the current U.S. administration has been consistently boosting its budget over the past couple of years, negating its predecessors’ budget sequestration policy. The fiscal 2021 U.S. defense budget proposal includes a spending plan of $20.3 billion for varied missile defense programs, up from $13.6 billion allotted for missiles in the year-ago budget.

Such favorable budget allocation is expected to benefit missile makers like Raytheon and Lockheed Martin.

Per Markets and Markets research firm, the global rocket and missile market is projected to rise from $55.5 billion in 2017 to $70 billion by 2022 at a CAGR of 4.74%. This solid growth opportunity should bode well for U.S. missile makers like Raytheon, Lockheed Martin as well as Northrop Grumman NOC, with America being the largest weapons supplier in the world.

Price Movement

In a year’s time, shares of Lockheed Martin have gained 17.3% against the industry’s 20.5% decline.

In the same period, shares of Raytheon have lost 47.3% compared with its industry’s 28.3% decline.

Zacks Rank & Key Pick

Both Lockheed and Raytheon currently carry a Zacks Rank #3 (Hold).

A better-ranked stock in the same sector is CAE Inc. CAE that carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.

CAE delivered average positive earnings surprise of 3.48% in the trailing four quarters. The company has a long-term earnings growth rate of 8%

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report
 
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