RTX awarded $677 million US Navy contract for SPY-6 family of radars

Rhea-AI Summary

Raytheon's RTX business has been awarded a $677 million contract to produce AN/SPY-6(V) radars for the U.S. Navy. This is the third exercise of a contract dating back to March 2022, which could be worth up to $3 billion over five years. Seven additional radars will be delivered, bringing the total to 38 under contract. The SPY-6 radars enhance air surveillance, electronic warfare protection, and detection capabilities. The USS Jack H. Lucas (DDG 125) and USS Richard M. McCool Jr. (LPD 29) are the first ships equipped with the new radar systems. SPY-6 is projected to be deployed on 65 Navy ships over the next decade.

Positive

• Award of $677 million contract for RTX to continue production of SPY-6 radars.
• Contract value up to $3 billion over five years, providing significant revenue potential.
• Seven additional radars contracted, indicating ongoing demand.
• SPY-6 radars enhance air surveillance, electronic warfare protection, and detection.
• Deployment on 65 Navy ships over the next decade suggests strong future demand.

Negative

• No immediate revenue impact from the full $3 billion potential as it is over five years.
• Dependence on continued government contracts could pose a risk if future funding is reduced.
• Initial deployment to two ships, with broader deployment spread over ten years, indicating a gradual revenue realization.

Insights

Financial Analyst

The awarding of a $677 million contract to Raytheon by the U.S. Navy represents a substantial financial injection for the company. The continuation of the SPY-6 radar production underlines the strategic importance of this technology for defense applications, as well as the U.S. government's commitment to long-term contracts. Investors should note that this contract is part of a larger $3 billion agreement, providing a stable revenue stream over multiple years.

Given the scale and frequency of these contracts, Raytheon exhibits strong financial health and consistent demand for its advanced radar systems. This could potentially lead to a steady increase in stock valuation and secure dividend payouts. From a financial perspective, this contract enhances Raytheon's earning visibility and underscores its leading position in the defense sector.

Defense Industry Expert

The SPY-6 radar system being deployed by the U.S. Navy is a significant technological advancement in naval defense. Its capability to provide superior air surveillance, electronic warfare protection and enhanced detection makes it a critical asset for the fleet's self-defense. The integration into various classes of ships, starting with the USS Jack H. Lucas, demonstrates the system's adaptability and importance.

The radar's integration into 65 ships over the next 10 years indicates a long-term commitment to this technology, which not only bolsters the defense posture of the U.S. Navy but also ensures continuous upgrades and potential future contracts for Raytheon. This level of commitment from the U.S. Navy is a testament to the effectiveness and reliability of the SPY-6 system, which can positively influence Raytheon's reputation and market position in the defense sector.

Market Research Analyst

From a market perspective, the contract for the SPY-6 radars reinforces Raytheon’s competitive edge in the defense electronics market. The radar's dual capability to defend against missile threats and control air traffic makes it a versatile tool for various naval operations. This versatility is a selling point that can lead to additional contracts not only from the U.S. Navy but potentially from allied navies across the globe.

Raytheon's ability to secure a contract of this magnitude underscores its strong market position and ability to deliver advanced defense solutions. For retail investors, this suggests that Raytheon is well-positioned to capitalize on global defense spending trends, which are expected to rise amid increasing geopolitical tensions.

Production, progress continues for U.S. Navy's new radar

ANDOVER, Mass., June 10, 2024 /PRNewswire/ -- Raytheon, an RTX (NYSE: RTX) business, was awarded a $677 million contract to continue to produce AN/SPY-6(V) radars for the U.S. Navy. This is the third option exercised from the March 2022 hardware, production and sustainment contract that is valued up to $3 billion over five years.

Under this contract, the U.S. Navy will receive seven additional radars, increasing the total amount of radars under contract for procurement to 38.

"SPY-6 provides the fleet with superior air surveillance, electronic warfare protection and enhanced detection abilities," said Barbara Borgonovi, president of Naval Power at Raytheon. "This contract is a significant step forward in ensuring this technology is delivered to ships to improve the overall self-defense of the fleet."

The U.S. Navy is integrating SPY-6 into its surface fleet beginning with the USS Jack H. Lucas (DDG 125) that was commissioned in October 2023. The USS Richard M. McCool Jr. (LPD 29) is the second ship and the first to deploy the (V)2 variant. LPD 29 was delivered to the U.S. Navy April 11 following successful completion of builder's and acceptance trials in the Gulf of Mexico. The SPY-6(V)2 radar not only provides defense against missile threats but will also provide air traffic control capability. 

The SPY-6 family of radars is the most tested, most advanced radar technology in production today. It is projected to be deployed on 65 U.S. Navy ships over the next 10 years to defend against air, surface, and ballistic threats.

About Raytheon
Raytheon, an RTX business, is a leading provider of defense solutions to help the U.S. government, our allies and partners defend their national sovereignty and ensure their security. For more than 100 years, Raytheon has developed new technologies and enhanced existing capabilities in integrated air and missile defense, smart weapons, missiles, advanced sensors and radars, interceptors, space-based systems, hypersonics and missile defense across land, air, sea and space.

About RTX
With more than 185,000 global employees, RTX pushes the limits of technology and science to redefine how we connect and protect our world. Through industry-leading businesses – Collins Aerospace, Pratt & Whitney, and Raytheon – we are advancing aviation, engineering integrated defense systems, and developing next-generation technology solutions and manufacturing to help global customers address their most critical challenges. The company, with 2023 sales of $69 billion, is headquartered in Arlington, Virginia.

For questions or to schedule an interview, please contact corporatepr@rtx.com

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SOURCE RTX

FAQ

What is the value of the RTX contract with the U.S. Navy for SPY-6 radars?

The contract is valued at $677 million, part of a larger contract that could be worth up to $3 billion over five years.

When was the RTX contract for SPY-6 radars first initiated?

The contract was first initiated in March 2022.

How many SPY-6 radars are being procured under the latest RTX contract?

Seven additional radars are being procured, bringing the total to 38.

Which ships are the first to be equipped with SPY-6 radars?

The USS Jack H. Lucas (DDG 125) and USS Richard M. McCool Jr. (LPD 29) are the first to be equipped with SPY-6 radars.

What are the capabilities of the SPY-6 radar system?

The SPY-6 radar system provides enhanced air surveillance, electronic warfare protection, and detection capabilities.

How many Navy ships are projected to deploy SPY-6 radars in the next decade?

SPY-6 radars are projected to be deployed on 65 Navy ships over the next 10 years.