Palantir's $10 Billion Military Contract Pale in Comparison to This Recent Development.
Raytheon Technologies (RTX) has made headlines with two significant contract wins from the US government, totalling $60 billion. The larger of the two contracts, worth $50 billion, was awarded by the US Defense Logistics Agency (DLA), while the other, a $10 billion contract, is for the support of Patriot air defense systems over the next 20 years.
The new Patriot contract consolidates 75 separate, smaller contracts into a single award. It encompasses systems, end-item production, spare parts, services, and other types of support. Assuming the Army does max out its allotted funds, the contract could provide $2.5 billion in annual Patriot revenue for RTX every year for the next 20 years. This is expected to generate about $1 billion in annual revenue for RTX due to the contract, before taxes.
The Patriot contract is not expected to significantly increase RTX's 8.7% long-term earnings growth rate as estimated by S&P Global Market Intelligence. However, it may generate additional cost efficiencies for RTX.
RTX is an industrial company with multiple business segments. Last year, the company produced sales of $80.7 billion, with revenue streams divided roughly equally among the three main business divisions. Raytheon, one of the business divisions, did sales of $26.7 billion last year.
Collins Aerospace, another RTX division, is RTX's most profitable unit, pulling down a fat 14.5% operating profit margin. In contrast, Pratt & Whitney, another division, is the least profitable at present, earning only a 7.1% margin.
The new Patriot contract is not dependent upon renewal of "option periods." Despite the $50 billion Patriot contract, RTX stock remains a sell for some analysts due to its high valuation of 33.5 times trailing earnings.
It's worth noting that the $10 billion contract win for Palantir Technologies is not the biggest award the US Pentagon handed out on Aug. 1. Raytheon Technologies also secured a $50 billion umbrella contract for Patriot missiles from the DLA, the details of which are yet to be fully disclosed.
The CEO of RTX since the time of the $50 billion contract with the US Defense Logistics Agency is not explicitly stated in the available search results. However, these contracts underscore RTX's continued dominance in the defense industry and its ability to secure large-scale contracts from the US government.
