Is Raytheon Making Money?

With war clouds gathering in the Middle East, many people are asking if defense contractors such as Raytheon (NYSE: RTN) are making money.

USA Today labeled Raytheon the world’s third largest defense contractor with $23.9 billion worth of arms sales in 2018.  I think Raytheon can profit from a Mideast War because of its product line.

To explain, if the United States and Iran fight a war the main weapons they will use will be missiles and drones. Raytheon’s major products include radars, missile interceptors, air-to-surface missiles, surface-to-air missiles, guided missiles, and surface-to-surface missiles.

Raytheon will build the weapons for the next war

Notably, the first major Iranian response to the assassination of Major General Major General Qassem Soleimani was an 8 January 2020 missile attack on US bases in Iraq. Therefore, Raytheon manufactures the weapons of choice for the war and the defenses against those weapons.

In addition, Raytheon manufactures a variety of electronics troops use in the field. The Boomerang III; for example, is a vehicle-mounted tracking system for enemy snipers. In addition, the Boomerang Warrior-X is a wearable-shooter detection system for individual shooters in the field.

Importantly, Raytheon builds defenses against drones. Recent events such as General Soleimani’s assassination show drones will be the principle weapons in the next war. For example Houthi drones heavily damaged two major Saudi facilities on 14 September 2019.

How Raytheon could profit from Drone Warfare

Iran’s Islamic Revolutionary Guards Corps has been training its Middle Eastern allies to use drones, The New York Times claims. Thus, American forces will need defenses against drones if they want to operate in the Middle East.

Raytheon claims its Stinger surface-to-air missiles can destroy drones. Moreover, Raytheon’s Coyote is a small, tube-launched drone soldiers can fire in the field. Tanks, commandos, or infantry could use the Coyote to take out snipers or enemy artillery, for instance.

In addition, the Coyote can dogfight enemy drones. Therefore, the Coyote could become the Army’s go-to anti-drone defense. Remember, the old saying that the best offensive is a good offense. The Coyote is an offensive weapon that attacks enemy drones.

Drones, such as the Coyote, could become as important in modern war as fighter planes were in World War II. Remember, fighter planes, such as the Supermarine Spitfire, won the Battle of Britain. Later in the war, the P-51 Mustang made Germany’s defeat possible by destroying the Luftwaffe’s fighter planes.

Raytheon also makes a second drone they call the Silver Fox. I think Raytheon could profit from Drone Warfare because it manufactures both drones and the radars that detect them.

Is Raytheon Making Money?

The Raytheon Company (NYSE: RTN) is making money. For instance, Raytheon reported a gross profit of $1.947 billion for the quarter ending on 30 September 2019.

In addition, Raytheon reported making a quarterly net income of $860 million on revenues of $7.446 billion for the quarter ending on 30 September 2019. Plus, Raytheon reported an operating income of $1.036 billion for the same period.

Moreover, Raytheon’s quarterly gross profit grew from $5.205 billion on 30 June 2019 to $5.499 billion on 30 September 2019. Thus, Raytheon is making more money from the Drone Wars.

Plus, Raytheon reported an operating cash flow of $1.277 billion and an ending cash flow of $476 million on 30 September 2019. Consequently, Raytheon had $2.646 billion in cash and short-term investments on 30 September 2019.

Is Raytheon a Value Investment?

I consider Raytheon (NYSE: RTN) overvalued because its shares were trading at $227.40 on 14 January 2020. In my opinion, Raytheon is not worth over $150 a share.

Comparatively, Raytheon is a good dividend stock. For instance, Raytheon paid a 94.25₵ quarterly dividend on 7 January 2020. Thus, I think you could make money from Raytheon, even though Mr. Market overprices RTN.

In total, Raytheon offered a dividend yield of 1.73%, an annualized payout of $3.77, and a payout ratio of 31.73% on 14 January 2020. Impressively, Dividend.com credits Raytheon with 14 years of dividend growth.

Is Raytheon a Growth Stock?

In my analysis, Raytheon is an overpriced stock that is a good dividend and income investment. Furthermore, recent events in the Middle East show Raytheon could be a growth investment.

Tension and turmoil and the possibility of war is increasing. Meanwhile, Raytheon builds what I think will be the dominant weapon that war: drones.

Plus, Raytheon’s main customer, the Pentagon has more money to spend. The Balance estimates U.S. military spending could grow to $989 million for the 1 October 2019 to the 30 September 2020 fiscal year. The Balance estimates U.S. military spending for the 2018 to 2019 fiscal year was $956.5 billion.

Unfortunately, Raytheon is a growth stock in today’s world. Consequently, those who have no moral objections to drone warfare, could make money by owning Raytheon shares.