Why You Should Add Raytheon Stock Today

Raytheon Technologies (NYSE:RTX) was formed when Raytheon and United Technologies completed their merger back in April. It is now one of the largest aerospace and defence companies in the world with a market cap of roughly $60 billion at the time of this writing. Its shares have dropped 35% in 2020 as of close on July 29. However, I’m very bullish on Raytheon going forward.

Some analysts believe that United States defence spending has peaked. I’m skeptical of this viewpoint. Global tensions have increased in 2020, and the rivalry between the US and China has grown more bitter. In 2019, the U.S. saw its defence budget surpass $710 billion.

Raytheon released its first quarter 2020 results on May 7. Net sales fell 1% year-over-year to $18.2 billion. Meanwhile, adjusted earnings per share declined 7% to $1.78. However, it finished Q1 2020 with a record backlog of $51.3 billion and net sales of $7.2 billion – up 6.5% from the previous year. The company put together a solid quarter in the face of the beginnings of the COVID-19 pandemic. Aerospace is facing unique challenges, so Raytheon will need to rely on its defence segment to pick up the slack in 2020.

Shares of Raytheon last possessed a price-to-earnings ratio of 12 and a price-to-book value of 1.3. This puts the stock in attractive value territory. Moreover, it offers a 3.2% dividend yield. Raytheon is a giant in a growing sector that is undervalued right now.