Raytheon Secures $50 Billion Patriot Missile Contract, Outshining Palantir's $10 Billion Deal

The US Pentagon awarded Palantir $10 billion, but on the same day, it awarded RTX $50 billion, 5x as much, for a 20-year contract to keep Patriot missiles in supply and in service. RTX has been hired to keep Patriot missiles in supply and in service for the next 20 years. The contract is worth $2.5 billion annually and is the largest award handed out by the Pentagon that day.

The U.S. Pentagon awarded a massive $50 billion contract to RTX, dwarfing the $10 billion contract given to Palantir on the same day. The RTX contract, which runs for 20 years, is set to generate $2.5 billion annually for the company. This contract is the largest award given by the Pentagon that day and underscores RTX's pivotal role in maintaining the Army's Patriot missile systems.

RTX, formerly known as Raytheon, will provide systems, end-item production, spare parts, and services for the Patriot air defense system. The contract's long-term nature and substantial annual revenue make it a significant win for RTX, which already had a substantial presence in the defense sector. The contract represents approximately 9.4% of Raytheon's total annual revenue, contributing about $243 million annually in profit, assuming the company maintains its current profit margin.

While the contract is substantial, it is important to note that it is not expected to significantly impact RTX's long-term earnings growth rate, which analysts estimate at 8.7%. This is because the contract's annual revenue and profit are not entirely new, as RTX was already selling Patriots to the Army before this contract. Additionally, RTX's stock valuation of 33.5 times trailing earnings suggests that investors should be cautious about the stock's potential for growth.

In comparison, Palantir's $10 billion contract, while substantial, is only a fraction of the RTX contract. Palantir's stock has seen a $20 increase this month, adding $45 billion to its market capitalization. However, investors should consider the broader context and the potential for RTX's stock to be a sell due to its high valuation and relatively low growth rate.

References:
[1] https://www.nasdaq.com/articles/forget-about-palantirs-10-billion-army-contract-news-much-bigger