Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We have maintained our Neutral recommendation on Raytheon Company (RTN - Analyst Report) on Jul 5, 2013 based on its international exposure, strong order bookings and order backlog, cash deployment strategy, and cost reduction initiatives.  However, the budget pressure compels us to remain on the sidelines.

Why the Reiteration?

Raytheon is one of the best-positioned companies among the large-cap defense players due to its non-platform-centric focus. This insulates the company from program specific risk related to cancellation or deferral of any specific program.

Going forward, revenue and earnings growth would continue to be driven by its strong presence in the areas of Intelligence, Surveillance and Reconnaissance; air & missile defense systems; border security; air traffic management; training and homeland security; and cyber security.

International sales continue to be a key source of sales for the company. The company believes that it is progressing well on opportunities like Kuwait Patriot, the Oman ground-based air defense system, as well as radars and missiles.

With growing threats to the environment and demand from customers to acquire the most advanced technologies in the world, the company is confident that the international portfolio will continue to be strong.

In order to offset the budget pressure, the company is aggressively pursuing cost-containment measures, making acquisitions, consolidating its business, and driving the international mix higher, thereby maintaining an industry-leading operating margin. Recently, Raytheon reorganized its business through segment realignment. The new structure will drive productivity, agility and affordability in a challenging defense and aerospace market environment.

Also, Raytheon’s under-leveraged balance sheet provides financial flexibility in matters of incremental dividend, ongoing share repurchases and earnings accretive acquisitions. In Mar 2013, the company raised its regular quarterly dividend by 10% from 50 cents per share to 55 cents per share (annualized $2.20 per share) generating a dividend yield of 3.34%.

Despite the positives, apprehensions over future growth of the U.S. defense budget, the fate of high-cost programs, risks related to key project executions and order cancellations keep us concerned.

Other Stocks to Consider

Stocks worth considering are Erickson Air-Crane Inc. (EAC - Snapshot Report), The Boeing Company (BA - Analyst Report) and Northrop Grumman Corp. (NOC - Analyst Report). While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy), The Boeing Company and Northrop Grumman hold a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%