RTX's Raytheon Secures $250 Million ESSM Block 2 Production Contract from MELCO

TUCSON, Ariz. – June 24, 2025 – Raytheon, an RTX (NYSE: RTX) business, today announced it has been awarded a significant $250 million contract from Japan's Mitsubishi Electric Corporation (MELCO) for the licensed production of the Evolved Seasparrow Missile (ESSM) Block 2. This contract represents a crucial milestone in the enduring partnership between Raytheon and MELCO, further solidifying their collaboration in advanced defense systems.

The ESSM Block 2 is a state-of-the-art, all-weather, surface-to-air missile designed to protect ships from a variety of threats, including anti-ship missiles, aircraft, and surface threats. Its advanced active and semi-active radar homing seeker provides enhanced capability against sophisticated threats. The licensed production agreement with MELCO underscores the global demand for this advanced defensive capability and highlights Japan's commitment to strengthening its naval defense posture.

This contract is a testament to the successful technology transfer and collaboration that has been fostered between Raytheon and MELCO over many years. MELCO has been a key partner in the ESSM program, contributing significantly to its development and production. This new agreement for Block 2 licensed production will enable MELCO to manufacture key components and potentially entire missiles within Japan, supporting local defense industrial capabilities and ensuring a reliable supply chain for the Japan Maritime Self-Defense Force (JMSDF).

The Evolved Seasparrow Missile program is a multinational effort, involving a consortium of nations working together to develop and produce this vital defense asset. Raytheon serves as the prime contractor for the program, leading the development and integration of the missile system. The Block 2 variant represents a significant upgrade over previous versions, incorporating advanced seeker technology and improved performance characteristics.

For RTX, this contract reinforces its position as a leading provider of advanced defense systems globally. The award contributes to the company's backlog and revenue streams within its Raytheon segment, which focuses on missiles and defense electronics. The continued success of the ESSM program, particularly the Block 2 variant, demonstrates the ongoing need for effective naval air defense solutions in the current geopolitical climate.

Market Context and Implications

The award of this contract comes at a time of increasing defense spending globally, particularly in the Indo-Pacific region. Nations are investing heavily in modernizing their naval forces and enhancing their capabilities to counter evolving threats. The ESSM Block 2 is a critical component of many naval defense strategies, making contracts like this highly significant for defense contractors like RTX.

The partnership with MELCO and the licensed production agreement also highlight the trend towards international collaboration in defense procurement and manufacturing. Such partnerships can facilitate technology transfer, reduce costs, and strengthen alliances between nations.

Investment Insights

For investors in RTX (NYSE: RTX), this contract is a positive development. It demonstrates continued demand for Raytheon's advanced missile systems and contributes to the company's long-term growth prospects. The defense sector is generally considered a stable investment, particularly during periods of geopolitical uncertainty. This contract, specifically, points to strength in the naval defense market.

Investors should monitor RTX's future contract awards and the performance of its Raytheon segment. The company's ability to secure and execute on large international contracts like this is a key indicator of its operational strength and market position. While this single contract is positive, a broader view of RTX's diverse portfolio across aerospace and defense is essential for a comprehensive investment analysis.

This contract underscores the importance of the ESSM program to RTX's defense business and its role in supporting the defense capabilities of key international partners like Japan. It is a positive signal for the company's outlook in the naval defense market.