The West's Insatiable Demand for Missiles Is Boosting U.S. Weapons Makers
Western companies that build missiles, including offensive rockets and defensive interceptors, say they are fielding a surge in new orders. Heavy demand for Patriot antimissile arrays, Thaad interceptors and Sidewinder missiles is keeping defense contractors from Lockheed Martin to RTX busy while some other business lines stumble.
Lockheed Martin on Tuesday reported an 11% increase in second-quarter sales within its missiles and firing control division, which makes Patriot air-defense missiles and high-end Thaad interceptors. Revenue rose 8% at RTX's Raytheon unit, powered by higher sales of its Patriot equipment and of Nasams, another surface-to-air missile system.
The U.S. Army asked Lockheed to quadruple production of its PAC-3 missiles for Patriot batteries. The company said it expects backlogged orders for its weaponry to hit a record later this year. The backlog at Raytheon swelled to $63.5 billion at the end of June, nudged higher by Navy contracts for new ship-fired SM-3 projectiles and AIM-9X Sidewinder missiles.
'The demand is very durable,' said RTX finance chief Neil Mitchill, citing continuing talks with European customers. 'That's why we're investing. These are very complicated products and many require a long lead time.'
The U.S. has been hoarding missiles for several years to strengthen its position in the Pacific region against China. But protracted fighting in Ukraine and the Middle East have drawn down Western missile supplies, according to Wes Rumbaugh, a fellow at the missile defense project at the Center for Strategic and International Studies.
A Nasams surface-to-air missile launcher sat on a production floor in Norway in 2023.
'A lot of the spike in the demand recently that has stressed the U.S. industrial base is the pop up of conflicts that they weren't expecting,' he said. 'They're sending a very strong short-term signal. The long-term question is whether or not those investments will translate into sustainable funding.'
The missile boom offers a contrast with other areas of the U.S. defense-industrial complex that are struggling to get off the ground. Lockheed surprised investors Tuesday by booking $1.8 billion in write-downs from big-budget jet-fighter and helicopter programs. The biggest loss came from a contract in the company's secretive Skunk Works unit, which designs advanced aircraft and other weaponry. The same program booked a $555 million loss last year.
Aircraft makers are wrestling with changing orders and costly research and development overruns. Shipbuilders are finding it hard to keep construction costs in check. Drone warfare is changing the way countries around the world equip their armies.
Still, the stepped-up demand for missiles is giving a jolt to the entire supply chain. Defense contractor Northrop Grumman said Tuesday it expects to pump out 25,000 solid rocket motors a year by 2029, up from 13,000 units today.
Europe's largest missile maker, MBDA, has proven lucrative for its three listed owners, BAE Systems, Airbus and Leonardo. MBDA now represents 13% of BAE's $44.5 billion order book, up from 6.5% in 2021, just before Russia's full-scale invasion of Ukraine.
In the first quarter of this year, growth for Norwegian technology company Kongsberg was mainly driven by increased delivery volumes for missiles—and defenses against them. Kongsberg's order backlog for missiles and air-defense systems now totals more than $8.4 billion, with sales of a naval strike missile to the U.S. being particularly lucrative.
Missile makers could reap another windfall from the Trump administration's Golden Dome for America antimissile shield project. The president called for an extensive buildup of air and space defenses to protect the U.S. against ballistic missiles and newer threats such as hypersonic weapons.
The Defense Department hasn't detailed the high-level design of the antimissile shield, but Trump's call for an operational system by the end of his term could end up boosting companies such as Lockheed, RTX and others ready to field more missile interceptors on short notice.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
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