Stocks · News reference
Collins Aerospace, a business segment of RTX, is expanding its partnership with Lufthansa Systems to enhance navigation data services.
Reference Details
Poisar stores the source's headline, summary and market tags for reference. Reporting and full article text remain with the original publisher.
Keep reading
Shares of RTX Corporation and other major defense contractors fell by more than 2% in premarket trading following the news that Democrats secured majorities in both chambers of Congress.
Raytheon, an RTX business, has secured a phase one contract from DARPA to develop all-optical processing technology for the PICASSO program.
Despite concerns about a Democratic sweep in the midterms potentially hurting defense stocks, historical data shows defense equities often recover within six months post-election. The article recommends GE Aerospace and RTX as top picks due to their significant commercial aerospace exposure, which provides a buffer against potential cuts to specific military programs. Large defense contractor backlogs tied to readiness, rearmament, and replenishment efforts remain bipartisan priorities.
Defense contractors Lockheed Martin, RTX, and Boeing are poised for growth as the Department of Defense shifts toward more favorable contract terms. Recent long-term agreements with Lockheed Martin featuring inflation adjustments, cash flow provisions, and recovery mechanisms signal an improved relationship between the government and defense companies, potentially derisk the sector and drive valuation gains.
RTX Corporation won an $8 billion sole-source contract from the U.S. Air Force to upgrade Strategic Communications Terminals for America's nuclear forces. The contract spans 10 years with completion in October 2036. While significant, the deal represents less than 1% of RTX's annual revenue and adds approximately $90 million in annual operating profit, making it unlikely to meaningfully impact the stock given its current 31x P/E valuation.
Lockheed Martin's order backlog surged to $292 billion in Q3 from $194 billion at year start, with improvements in both quantity and quality. The company is securing higher-margin contracts like the $58.6 billion PAC-3 missile defense system and establishing more favorable long-term agreements with the Department of Defense that include fixed-price escalators, upfront payments, and cancellation protections. These developments reduce execution risk and suggest improving profit margins, making the stock attractive at 22x earnings.