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Raytheon (RTN) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, Raytheon (RTN) closed at $198.96, marking a +0.18% move from the previous day. This change lagged the S&P 500's 1.09% gain on the day. Elsewhere, the Dow gained 1.21%, while the tech-heavy Nasdaq added 1.34%.

Prior to today's trading, shares of the defense contractor had gained 0.59% over the past month. This has lagged the Aerospace sector's gain of 0.83% and outpaced the S&P 500's loss of 1.17% in that time.

RTN will be looking to display strength as it nears its next earnings release, which is expected to be October 24, 2019. On that day, RTN is projected to report earnings of $2.86 per share, which would represent year-over-year growth of 27.11%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $7.22 billion, up 6.06% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $11.73 per share and revenue of $28.94 billion, which would represent changes of +10.56% and +6.94%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for RTN. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. RTN currently has a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that RTN has a Forward P/E ratio of 16.93 right now. Its industry sports an average Forward P/E of 21.95, so we one might conclude that RTN is trading at a discount comparatively.

It is also worth noting that RTN currently has a PEG ratio of 1.59. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Aerospace - Defense Equipment stocks are, on average, holding a PEG ratio of 2.08 based on yesterday's closing prices.

The Aerospace - Defense Equipment industry is part of the Aerospace sector. This industry currently has a Zacks Industry Rank of 75, which puts it in the top 30% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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