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Raytheon Wins $239M Air Force Deal for StormBreaker Bomb

Zacks.com logo Zacks.com 10/16/2020

Raytheon Technologies Corporation’s RTX Missiles & Defense unit has recently secured a $239.1-million modification contract for the Lot 6 production of StormBreaker (SDBII, GBU-53/B). The contract was awarded by the Air Force Life Cycle Management Center, Eglin Air Force Base, FL.

Per the deal terms, 6.3% of the contract value supports classified Foreign Military Sales (FMS). Work related to the deal will be performed in Tucson, AZ, and is expected to get completed by Nov 28, 2023.

Advantages of the StormBreaker Bomb

Raytheon Technologies' StormBreaker bomb, formerly known as the Small Diameter Bomb II (SDB II), provides warfighters with the ability to hit moving targets in all-weather conditions, especially when the visibility is limited. The SDB-II is capable of three modes — a millimeter-wave radar that detects and tracks targets through all weather, imaging infrared for improved target discrimination and a semi-active laser allowing it to track lasers in the air or on the ground. Further, the weapon can fly more than 45 miles to strike mobile targets.

What's Favoring Raytheon Technologies?

Increasing geopolitical tensions across the globe have prompted nations to strengthen their defense systems manifold. With rapid technological upgrades, missile defense has steadily emerged to play a pivotal role in a nation's defense strategy. To this end, Raytheon Technologies' Missiles & Defense unit secures significant awards from the United States as well as international customers, courtesy of its high-end, combat-proven arsenals. The latest contract win is an evidence of that.

Interestingly, per a report by Markets and Markets, the precision-guided munition market is projected to see a rise from $30 billion in 2019 to $47.5 billion by 2025, at a CAGR of 8%. Such projections, on a whole, should enable Raytheon Technologies to significantly grow in the expanding global munitions market in the days ahead.

Furthermore, the U.S. fiscal 2021 defense budget includes a spending plan of $5.1 billion on Preferred Munitions. The budget hints at a prospective selection of Raytheon Technologies' StormBreaker program that has been allotted $400 million. The latest contract win is a bright example of that. Such favorable budgetary developments reflect solid growth prospects for Raytheon Technologies’ top line, going ahead.

Other Defense Majors to Benefit

Additionally, such favorable trends should benefit other major munitions manufacturers like Lockheed Martin LMT, General Dynamics GD and Northrop Grumman NOC.

Lockheed Martin’s Dual Mode Laser Guided Bomb (DMLGB) is in service with the U.S. Navy. It also manufactures the Paveway II Plus Laser Guided Bomb that integrates an advanced guidance system to convert conventional gravity bombs into precision-guided munitions.

Likewise, General Dynamics develops small, medium and large variants of caliber ammunition and high-quality mortar components and increments the for U.S. military.

Northrop Grumman specializes in developing precise weapons and ammunition for artillery and mortar systems, medium-caliber weapons platforms, battle tanks and individual soldiers.

Price Performance and Zacks Rank

Raytheon Technologies', a Zacks Rank #4 (Sell) stock, has plunged 56.3% in the past year compared with the industry’s decline of 38.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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