Raytheon Technologies Corporation (RTX - Get Rating) is an aerospace and defense corporation that delivers innovative technologies and services worldwide to commercial, military, and government clients. With four industry-leading companies, Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense, RTX delivers solutions that push the frontiers in avionics, cybersecurity, directed energy, electric propulsion, hypersonic, and quantum physics.

RTX’s dividend payouts have grown at a CAGR of 4% over the past five years. While its four-year average dividend yield is 2.39%, its current dividend translates to a 2.37% yield. It paid a $0.51 per share quarterly dividend on December 16, 2021. The stock has gained 20.4% over the past year and 1% over the past six months to close the last trading session at $86.06.

Recently, the company’s Board of directors has authorized a share repurchase program of $6 billion of its outstanding common stock. This exhibits RTX’s robust cash flow generating capabilities.

Here’s what could shape RTX’s performance in the near term:

Positive Developments

Last month, the Missile Defense Agency (MDA) chose RTX as one of the companies to build and test the first interceptor, particularly intended to resist hypersonic threats. The Glide Phase Interceptor (GPI) weapon will counter a new generation of hypersonic missiles – weapons that move faster than the speed of sound and maneuver rapidly in flight.

Also, last month, Blue Canyon Technologies LLC, a wholly-owned subsidiary of RTX, was selected by Ball Aerospace to create a standardized X-SAT Venus ESPA-class microsatellite bus and numerous unique components for a forthcoming one-of-a-kind mission with NASA for the Solar Cruiser project.

Robust Financials

During the third quarter ended September 30, 2021, RTX’s net sales increased 9.9% year-over-year to $16.21 billion. Its operating income increased 209.4% year-over-year to $1.34 billion. The company’s net income grew 427.7% from the year-ago value to $1.39 billion, while its EPS grew 447.1% from the prior-year quarter to $0.93.

Impressive Growth Prospects

The consensus revenue estimate of $16.65 billion for the next quarter (ending March 2022) indicates a 9.2% improvement year-over-year. Analysts expect RTX’s EPS to rise 18% from the same period last year to $1.12 next quarter.

Street expects RTX’s revenues and EPS to rise 54.6% and 13.1% year-over-year to $64.62 billion and $4.22, respectively, in the fiscal year 2021. In addition, RTX’s EPS is expected to rise at a 22.8% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Each of the three Wall Street analysts that rated RTX have rated it Buy. The 12-month median price target of $101.67 indicates an 18.1% potential upside. The price targets range from a low of $100.00 to a high of $105.00.

POWR Ratings Reflect Solid Prospects

RTX has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. RTX has an A grade for Growth and a B for Stability. RTX’s solid earnings and revenue growth potential is consistent with the growth grade. And the stock’s relative stability compared to the broader market is in sync with the Stability grade.

Of the 73 stocks in the D-rated Air/Defense Service industry, RTX is ranked #15.

Beyond what is stated above, we have graded RTX for Sentiment, Value, Quality, and Momentum. Get all RTX ratings here.

Bottom Line

RTX is currently trading 6.8% below its 52-week high of $92.32, which it hit on October 22. However, the company has solid fundamentals and holds the potential to keep increasing its dividend payments. Moreover, it is projected to benefit from the growing demand across its commercial aerospace and defense businesses. So, we think it could be wise to add the stock to your portfolio now.

How Does Raytheon Technology Corporation (RTX) Stack Up Against its Peers?

RTX has an overall grade of B in our proprietary rating system. This rating is superior to its peers in the Air/Defense Service industry, such as Atlas Air Worldwide Holdings (AAWW - Get Rating), NAPCO Security Technologies Inc. (NSSC - Get Rating), and Woodward Inc. (WWD - Get Rating), which have a C (Neutral) rating.

RTX shares were trading at $86.83 per share on Monday morning, up $0.77 (+0.89%). Year-to-date, RTX has gained 24.37%, versus a 28.91% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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