Raytheon is a huge American company that makes guided missiles. Recently, it has been making a lot of money selling military supplies for the conflict in Ukraine, even though it was struggling just before the war began in February 2022. An analysis of the company’s financial reports shows how they turned their fortunes around.
The Rise of Raytheon
Raytheon’s missile production branch, called Raytheon Missiles & Defense (RMD), has been busy producing advanced missile systems for Ukraine. Some of these include the National Advanced Surface-to-Air Missile Systems (NASAMS) and popular missiles like the Stinger and Javelin. Since early 2022, these weapons have been sent to help Ukraine defend itself.
The company’s sales have been growing steadily for five quarters in a row. Before the war, they were facing declining sales for about a year. But once the conflict escalated, demand for their products shot up.
New Orders and Profits
Raytheon’s financial reports reveal that they made billions from the U.S. military aid to Ukraine, taking advantage of the increasing need for weapons. Their backlog of unfilled contracts grew from $63 billion at the end of 2021 to $77 billion by mid-2023. This means they have a lot of future sales lined up!
Before the Ukraine conflict, Raytheon’s sales were dropping. For instance, by the end of 2021, their sales were down by 8% compared to the previous year. But by mid-2022, things started to change. They received new orders as countries around the world began to recognize the urgent need for missile systems.
In the second quarter of 2022 alone, Raytheon secured new sales worth $3.56 billion, with $662 million coming from replenishing Stinger missiles for the U.S. Army. This was crucial since over 1,000 Stinger missiles had been sent to Ukraine.
Growing Demand for Missiles
As the war continued, Raytheon kept receiving more orders. In the fourth quarter of 2022, they reported a 6% increase in sales, and a significant part of this was due to the demand for missiles in Ukraine. They landed a $698 million deal for NASAMS, which accounted for about 17% of their new sales during that period.
By mid-2023, they signed a massive $1.15 billion contract for Advanced Medium-Range Air-to-Air Missiles (AMRAAM) intended for 18 countries, including Ukraine. This deal represented a huge chunk of their sales, making up nearly 29% of their total new sales.
The Ongoing Impact of the Conflict
Even though Raytheon has merged some of its divisions recently, the demand for missile production continues to surge due to the ongoing conflict in Ukraine. In the first quarter of 2024, they secured another $1.2 billion order for Patriot missile systems from Germany, which had sent its own systems to Ukraine.
Raytheon’s partnerships, like the one with Lockheed Martin for the Javelin missiles, also play a role in their success. They are ramping up production to meet the growing needs, with plans to produce nearly 4,000 Javelin missiles annually by late 2026.
The Bigger Picture
As of August 2023, the impact of U.S. military aid to Ukraine was estimated at $36.8 billion on the defense industry. Various U.S. states have benefited, with Arkansas and Pennsylvania leading the way in receiving funds.
Looking ahead, experts believe that major defense contractors like Raytheon could see a combined cash flow of $26 billion by the end of 2026 due to ongoing military support, not just for Ukraine but also for Israel amidst escalating tensions in the Middle East.
Raytheon’s ability to profit from the ongoing conflict in Ukraine illustrates how a single geopolitical event can drastically change a company’s fortunes. Their rapid growth in missile sales shows how the military industry is thriving in times of crisis.
