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RTX Unit Wins $355M Deal for South Korea's F-15 & F-16 Jets

RTX Corporation RTX recently announced that its Pratt & Whitney unit has been awarded a $355 million contract for F100 engine performance-based logistics (PBL) by South Korea's Defense Acquisition Program Administration (“DAPA”).

The contract marks the third consecutive PBL contract that Pratt & Whitney and DAPA have signed since 2012. This reflects the decade-long relationship to elevate the overall readiness of the Republic of Korea Air Force's fleet, comprising F-15 Eagles and F-16 Fighting Falcons.

Sustainment work related to the contract began in December 2023 and will run through the latter half of 2027.

Significance of F100

Pratt & Whitney’s F100 engine is the most trusted and experienced propulsion solution in the world. It delivers superior capability with industry-leading safety, reliability and performance to the global fleet of F-15s and F-16s. With low cost per flight hour and lowest life cycle costs, it provides excellent value to its customers.

The F100 engines have powered the F-15 for more than 50 years. Incorporated with the 5th generation technology, there are more than 3,800 F100 engines in 23 air forces around the world. Such notable contract wins are indicative of the solid revenue generation prospects RTX has in the expanding military jet market.

Growth Opportunities for RTX

Increasing geopolitical disputes worldwide have prompted nations across the globe to significantly secure their borders, thereby leading them to invest heftily in defense. With a country’s aerospace playing a critical role in defending its perimeter, demand for advanced military jets along with technologically developed equipment like jet engines is in vogue.

Consequently, the growth prospects for combat jet engines remain solid. To this end, the Dataintelo firm projects the global military aircraft engines market to witness a CAGR of 5.27% during the 2024–2032 period. This should benefit RTX’s Pratt & Whitney, which enjoys an extensive portfolio of engines containing the F135, F119, F117, F100 and TF33, along with a few more, thereby boasting strong demand in the military aircraft engine market.

Notably, Pratt & Whitney ended 2023 with a backlog of $838 million for F135 sustainment and $443 million for F119 sustainment. As of today, more than 7,000 Pratt & Whitney military engines are in service with 34 armed forces worldwide. Pratt & Whitney is also expanding its global presence with the recent establishment of its new India Digital Capability Center in Bengaluru, India.

Peer Moves

Apart from RTX, defense contractors that are likely to benefit from the growth opportunities offered by the military aircraft engine market are as follows:

Safran SAFRY: Safran is a leading military aircraft engine manufacturer, covering all defense missions, combat, transport and training. It supplies the whole M88 engine for the Rafale fighter and is part of a consortium making the TP400 turboprop engine for the Airbus A400M transport aircraft.

SAFRY has a long-term (three-to five-years) earnings growth rate of 34.2%. The Zacks Consensus Estimate for 2024 sales suggests growth of 37.2% from the prior-year estimated figure.

Rolls-Royce RYCEY:  Rolls-Royce is a powerful player in the defense aerospace engine market. It currently has 16,000 military engines in service with 160 customers in 103 countries. Its engine portfolio includes EJ200, RB199, PEGASUS, ADOUR etc.

The Zacks Consensus Estimate for RYCEY’s 2024 sales suggests growth of 18% from the prior-year estimated figure. The company’s share price has surged 194% in the past year.

MTU Aero Engines MTUAY: The company offers a diverse portfolio of engines - EJ200 powering the Eurofighter Typhoon, TP400-D6 powering the Airbus A400M, T408 powering Sikorsky Ch-53K helicopter etc. MTU, along with Safran and ITP Aero, will support the next European fighter engine, which is expected to be completed in 2040.

The Zacks Consensus Estimate for MTU’s 2024 sales suggests growth of 13.8% from the prior-year estimated figure. The consensus mark for 2024 earnings implies an improvement of 13.2% from that estimated in 2023.

Price Performance

In the past six months, shares of RTX have gained 7.8% against the industry’s 1.2% decline.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank

RTX currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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