Raytheon: Strong Q4 Finish, On Track To Deliver 2025 Targets

(Preview) Company Update (RTX US) (Buy)

Summary

• RTX stock reached a new post-pandemic high on Wednesday, but continues to represent a solid investment with good long-term growth.

• Q4 results showed that its aerospace segments continued to benefit from the recovery in air travel, while its defense segments stayed solid.

• Management is on track to deliver $10bn+ of Free Cash Flow in 2025, with a 20% growth in Free Cash Flow included in its 2022 outlook.

• Relative to 2022 guidance, RTX stock trades at a reasonable 20.3x P/E and a 4.2% Free Cash Flow Yield. The Dividend Yield is 2.1%.

• With shares at $95.99, we expect an exit price of $128 and a total return of 49% (11.4% annualized) by 2025 year-end. Buy.

Introduction

Raytheon Technologies stock closed at $95.99 on Thursday (February 9), a new high since RTX was created in April 2020, in the early days of the pandemic, from merging United Technologies and Raytheon and spinning off Otis and Carrier:

We initiated our Buy rating on RTX in May 2020. Since our initiation, RTX stock has gained …