馃獤 RAYTHEON CORPORATION: ANALYSIS 馃獤
Raytheon Corporation [RTX] is an aerospace and defense company, provides systems and services for the commercial, military, and government customers worldwide. It operates through four segments: Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense.
Based on a sample of the last year [2Q/23 TTM], its average margins have been:
- Gross margin: ± 20%
- Operating margin: ± 11%
- Net margin: ± 8%
- EBITDA margin: ± 17%
The pros: Strong financial performance (in the most recent quarter, the company reported earnings per share which was up 12% year-over-year), leading market positions (RTX has a strong track record of winning new contracts and expanding its market share), global reach (RTX has a global footprint with operations in more than 40 countries which need to upgrade their weaponry) and technology leadership.
The cons: Increased competition, changes in government spending (the defense budget is subject to change, and any cuts in spending could have a negative impact), regulatory changes (the defense industry is heavily regulated, and any changes in regulations), geopolitical risks (wars and conflicts could disrupt RTX's supply chain and operations, and could also lead to increased demand for the company's products) and sustainability concerns (the company faces increasing pressure to reduce its environmental impact).
Based on 2Q/23, the last normalized EPS was ± $3.81 USD and its last average ROIC [TTM] was ± 8.18%. If an average PER 25 is set as a benchmark, the potential forward spread target could be:
- Optimistic: ± $104 USD
- Neutral: ± $95 USD
- Negative: ± $87 USD
At least, an EPS of $0.94 USD is required for the next quarter, to maintain the metrics.
In other hand, if an average EV/EBITDA 15 is set, an EBITDA increases of 6.5%, a Net Debt increases of 5% and Shares Outstanding increases of -1%, the potencial forward fair price target could be ± $110 USD.
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J. Joel Padilla
Copyright: Joel Padilla 2023
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