Raise your hand if you remember the Stinger missile. Keep your hands raised if the reason you remember the Stinger is from reading newspapers during the Reagan Administration and think of them as the missiles the mujahideen used to shoot down Soviet helicopters in Afghanistan.

Yep. That's what I thought. But here's something that may surprise you: 35 years after the Soviets pulled out of Afghanistan, the Stinger is making a comeback. And Raytheon is about to start making money selling Stinger missiles again.

From Afghanistan to Ukraine

This isn't exactly a new story. Ever since the renamed USSR -- Vladimir Putin's Russian Federation -- invaded Ukraine in 2022, NATO militaries have been hauling Stingers out of storage, dusting them off, and sending them to Ukraine. To date, some 2,000 Stingers have been donated to help with Ukraine's defense.

But as the war drags on and stockpiles run low, the U.S. Pentagon is thinking the time is right to revive Stinger production -- not just for Ukraine, but for itself and its allies. In December, the U.S. Defense Security Cooperation Agency -- DSCA, the Pentagon arm that coordinates foreign military sales -- advised Congress that the U.S. State Department has approved a request by Germany, Italy, and the Netherlands to buy 940 new Stinger missiles. Assuming Congress approves the sale, RTX Corporation (RTX -0.29%) -- as Raytheon was recently renamed -- stands to reap hundreds of millions of dollars in revenue from this sale.

Restarting the Stinger

RTX hasn't built new Stingers for 20 years. But as Defense One reported in June, after the Ukraine war started, the Pentagon asked it to restart production, ordering 1,700 modernized missiles to be produced by 2026.

The new missiles will be upgraded FIM-92 "K" variant Stingers -- nine generations removed from the missiles used in the Soviet-Afghan war. Equipped with new proximity fuzes, the new Stingers will be able to engage 21st Century threats that didn't exist 40 years ago -- specifically, small unmanned aerial vehicles (UAVs) that are too small to "hit."

They'll also be configured for firing from military vehicles, such as Humvees, and receive targeting data from their launchers en route. This is a crucial upgrade when tracking UAVs that put out little or no heat signature and might not be discoverable by "original recipe" Stingers, which were heat seekers.

Who will build the Stingers?

Here's where things get interesting (for investors). RTX has historically been the authorized manufacturer of the Stinger missile. But late last year, the U.S. Army awarded contracts to both RTX and its archrival in missile systems, defense contracting giant Lockheed Martin (LMT -0.75%), to develop an improved Stinger missile.

In September last year, both RTX and Lockheed were awarded contracts for "upgrades and replacement" of the Stinger -- $418.3 million for Raytheon and $312 million for Lockheed Martin ($730.3 million in total). These contracts do not, however, appear to be related (at least not directly) to the sale that DSCA notified Congress about in December, which is worth $780 million in total. What's more, Aviation Week confirms that the total number of upgraded Stingers the Pentagon wants to buy could rise to 8,000 -- 8 1/2 times as many as described in the NATO sale.

On the one hand, this probably comes as something of a disappointment for investors in RTX. The company isn't winning the Stinger contract all for itself but must split the sale with Lockheed. On the other hand, when viewed in light of the September 2023 contract, it turns out that eventual Stinger revenue could be bigger for both RTX and Lockheed -- as much as 8.5x bigger.

How profitable is this for Raytheon?

Let's not count all 8,000 of these "chickens" before the eggs have hatched. But even the $1.51 billion in contracts that have already been awarded are pretty significant. Assuming the same rough 57-43 split in contract value seen in the September contracts, $1.51 billion in total contracts should mean at least $865 million in incremental revenue for RTX.

Will that be enough to move the needle for this defense stock?

Raytheon Missiles & Defense, the RTX unit through which Stinger sales will run, is the company's second smallest business unit, with $14.9 billion in annual sales. However, it's also RTX's second biggest profits contributor, generating $1.5 billion in operating profits, according to data from S&P Global Market Intelligence.

So $865 million in sales at Raytheon Missiles & Defense averaging a 10.2% profit margin should mean about $88 million in incremental profits for RTX, or about $0.06 extra per share -- roughly 3% of an average year's profits for the company. Spread that out over three years from now to 2026, and that could be enough to grow Raytheon's annual earnings growth rate from the 11% it's currently expected to grow to, perhaps, 12%.

It's not a huge amount, granted. But I believe it's big enough to move the needle on RTX stock. And if RTX gets an order for 8,000 more missiles, you can expect that needle to move even higher.