Rocket Lab Targets Missile Defense and Golden Dome as Its Next Growth Market

By now you've heard the news: Golden Dome, President Trump's $151 billion plan to build a satellite-based missile shield over America, has been expanded with the award of a $3.2 billion umbrella contract to develop a system of "space-based interceptor" missiles, or SBIs, to shoot down hostile missiles.

All the big names in U.S. defense -- General Dynamics (NYSE: GD), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), RTX Corporation (NYSE: RTX) -- will compete for contracts under the umbrella contract. One of these four has a secret weapon, though:

Rocket Lab (NASDAQ: RKLB).

Image source: Getty Images.

What's in it for Rocket Lab?

Concurrent with its earnings report last week, Rocket Lab announced Friday that it's partnering with RTX on the latter's bid for work under the SBI contract. Considering we know already that RTX has won a place under the SBI program, it follows that Rocket Lab has, too -- at least as a subcontractor.

The attractions for Rocket Lab here are obvious. With SBI worth up to $3.2 billion for the winners, this program is worth potentially as much as 4.7 times Rocket Lab's $680 million in trailing-12-month sales, depending on how successful RTX is with its bidding. Plus, RTX has already done the heavy lifting of winning this contract.

All Rocket Lab needs now is to do the work.

Rocket Lab: RTX's hired gun

RTX arguably has even more to gain. To win SBI contracts, it must outcompete Lockheed Martin and Northrop Grumman in particular, two companies that have already won "Golden Dome" contracts under Space Force's preexisting PWSA (Proliferated Warfighter Space Architecture) missile detection-and-tracking program.

(RTX won a small number of similar contracts initially, but later withdrew from the PWSA competition.)

In Rocket Lab, however, RTX has found a partner that has won PWSA "tracking layer" satellite contracts in its own right, as a prime contractor. In a stark reversal of roles, the defense contractor is now riding the coattails of its space contractor partner.

Maybe even "riding," literally. Whereas Lockheed Martin has access to space through its joint venture with Boeing (NYSE: BA), and can launch satellites through United Launch Alliance, and Northrop Grumman can do similarly with its Antares, Pegasus, Minotaur, and soon its Eclipse rockets, RTX doesn't own a dedicated space rocket platform.

But Rocket Lab does. Its Electron rockets now send satellites into orbit several times a month. Once its Neutron rocket is ready, it'll be able to put entire satellite constellations in orbit with every launch.

This is the kind of partnership that can truly work out well for both parties involved.

Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Boeing, RTX, and Rocket Lab. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.