Raytheon Scores $239M US Air Force Contract Modification

Raytheon (RTX) has been awarded a $239M definitization modification to contract for StormBreaker production Lot 6, announces the US Department of Defense. Work will be performed in Tucson, Arizona, and is expected to be completed Nov. 28, 2023.

“The current action relates to classified Foreign Military Sales (FMS), and 6.3% of contract value supports FMS” the defense department stated, adding that the total cumulative face value of the contract is $271,894,434.  

The Air Force Life Cycle Management Center, Eglin Air Force Base, Florida, is the contracting activity.

While Raytheon shares have stumbled in 2020, and are currently trading down 32% year-to-date, Goldman Sachs sees the weakness as a buying opportunity.

Analyst Noah Poponak believes RTX is “too high quality and well positioned of a company to trade at an 11% free cash flow yield on the fully aerospace-recovered and fully synergized 2023E free cash.”

Specifically he calls the company’s aerospace aftermarket business “the best sub-market within Aerospace over the long-term.” This segment makes up roughly 45% of RTX’s aerospace revenue.

Even though COVID-19 flight disruptions have weighed on this part of the business, Poponak points out total aircraft in service is down only 25% year-over-year, and flights have dipped less than 50%.

He added, “China domestic traffic is now up year on year, and while international remains depressed, we believe the recovery in global air travel could be quicker from here than broad expectations for a recovery by 2023-2024.”

As a result, the Goldman analyst keeps a Buy rating and $86 price target on the stock (indicating 42% upside potential).

Overall, the Street mirrors this bullish sentiment. Seven Buys and 2 Holds published in the last three months add up to a Strong Buy consensus rating. With an average price target of $77, the upside potential comes in at 27%. (See RTX stock analysis on TipRanks)

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