So far, the Iran war has relied on missiles and air power rather than ground forces, putting more attention on one of the Pentagon’s favored weapons: the Tomahawk cruise missile. Tomahawk missiles are manufactured by defense contractor RTX (RTX) through its subsidiary, Raytheon.
Reports indicate that the U.S. has fired more than 850 Tomahawk missiles in the war with Iran. The Center for Strategic and International Studies (CSIS) reports that Tomahawks are being used in the Iran war more than in any military campaign in history. “Replenishing inventory after this campaign will take time, and creates near-term risk for the United States,” the organization noted.
The missiles, which can be launched from ships and submarines and can strike targets within 1,000 miles, cost between $2 million and $3.5 million each and are the subject of several military contracts. RTX signed a $381 million contract in late January for Tomahawk missile work, and also received a $384 million modification to a previously awarded contract in December. On Feb. 4, the company also announced five framework agreements with the Pentagon to increase production and speed up deliveries of its Tomahawk missiles and other products.
With Tomahawk reserves reportedly dwindling, RTX and Raytheon appear to be a compelling investment for the near future. Even if the war winds down quickly, Raytheon will be hard at work replenishing U.S. reserves for the foreseeable future. And that will mean plenty of profits for RTX stock.
Let’s take a closer look..
RTX is the parent company of Raytheon, Collins Aerospace, and Pratt & Whitney. The company, which used to be known as Raytheon Technologies, is headquartered in Arlington, Virginia, which is strategically close to the Pentagon. RTX has a market capitalization of $267 billion.
Shares are up 67% in the last year, far outdistancing the S&P 500 ($SPX). But while defense stocks have enjoyed big returns in the last 12 months, RTX is notably outperforming many of its biggest competitors, including Lockheed Martin (LMT), General Dynamics (GD), and Northrop Grumman (NOC).
However, RTX stock’s rapid rise has coincided with an elevated valuation. The stock trades at a forward price-to-earnings (P/E) ratio of 28.8 times versus competitors all trading at 25 times or lower. Still, RTX is trading at roughly its 10-year mean, so shares are not outrageously priced at this point.
