Are you looking for a defense stock that offers exceptional value and growth potential? Look no further than RTX Corporation (NYSE: RTX), also known as Raytheon. Despite recent market disinterest in the defense sector, RTX has emerged as a top pick for savvy investors. Let’s delve into why RTX is the best buy among defense companies.
Raytheon – Exceptionally Cheap
When it comes to value, RTX is hard to beat. Currently trading at only around 13 times 2024 Consensus EPS estimates and 11 times 2025’s expectations, RTX offers substantial growth potential in the coming years. The stock is remarkably cheap considering its forward P/E ratio and the double-digit EPS growth it is projected to deliver. Furthermore, RTX consistently surpasses EPS estimates, outperforming consensus expectations in each of the past five years.
Raytheon – Likely To Beat EPS Estimates
Despite the challenging macroeconomic environment, RTX has a history of beating EPS estimates. In the past year, RTX exceeded its TTM EPS estimates by 8.4%. With consensus estimates predicting $5.58 EPS in 2024, a similar beat rate could push earnings to $6.05. Looking ahead to 2025, analysts estimate an EPS of $6.56, but considering past performance, RTX could potentially outperform expectations. This earnings growth potential positions RTX as a strong contender for investors seeking solid double-digit growth.
Why Raytheon Is My Number One Defense Pick
Apart from its compelling financials, RTX is at the forefront of innovation in the defense industry. Its portfolio of products includes some of the most sought-after and technologically advanced systems in the market. As global conflicts persist, the demand for RTX’s weapons is likely to increase. Raytheon operates through four primary segments, each contributing to its success.
The “Raytheon” Segments
Raytheon Intelligence & Space and Raytheon Missiles & Defense are two key segments of the company that combine to provide cutting-edge solutions for commercial, military, and government customers. From market-leading air-to-air missiles to advanced surveillance equipment, RTX offers a comprehensive range of state-of-the-art products that empower its clients to dominate the skies.
Furthermore, RTX is a leader in hypersonic weapons technologies and produces highly popular and effective systems such as the Tomahawk cruise missile. Additionally, its Global Patriot Solutions, a missile defense system, plays a critical role in safeguarding nations against various threats.
Collins Aerospace Segment
RTX also services a wide range of industries through its Collins Aerospace Segment. With capabilities in autonomous operations, cabin experience, connected battle space, and more, RTX provides innovative solutions that meet evolving market needs.
The Pratt & Whitney Segment
As one of the “big three” aero engine manufacturers globally, Pratt & Whitney is a significant part of RTX. With a vast customer base and a strong presence in over 200 countries, Pratt & Whitney is a major player in the aerospace and defense industry.
Raytheon Vs. Other Top Defense Contractors
- Raytheon: Forward P/E ratio (consensus 2024) – 13, EPS growth – 11%, Revenue growth – 9%, forward PEG ratio – 1.18, Dividend – 3.2%.
- Lockheed Martin (LMT): Forward P/E ratio (consensus 2024) – 16, EPS growth – 3%, Revenue growth – 3%, forward PEG ratio – 5.33, Dividend – 2.8%.
- Northrop Grumman (NOC): Forward P/E ratio (consensus 2024) – 20, EPS growth – 9%, Revenue growth – 6%, forward PEG ratio – 2.22, Dividend – 1.5%.
- General Dynamics (GD): Forward P/E ratio (consensus 2024) – 17, EPS growth – 17%, Revenue growth – 6%, forward PEG ratio – 1, Dividend – 2.2%.
When comparing RTX to other top defense contractors, it becomes evident that RTX is significantly cheaper and offers better growth potential. With the best revenue growth, EPS growth, and the highest dividend among its competitors, RTX stands out as the top choice for investors seeking value and growth in the defense sector.
The Takeaway
As analysts on Wall Street have acknowledged, RTX is a buy with an average price target of around $90, representing a potential 20% upside from its current price. With minimal downside risk and the potential for strong growth in the coming years, RTX is an attractive investment option.
Looking ahead, RTX’s stock price projections suggest a positive trajectory. Revenue is estimated to reach $123 billion by 2030, with EPS growing at a steady pace. This growth potential, coupled with a forward P/E ratio that remains modest, makes RTX an excellent long-term investment choice.
In conclusion, if you’re searching for a defense stock with value, growth, and a solid dividend, RTX Corporation is your best bet. Its innovative products, compelling financials, and strong analyst consensus position it as the top defense stock to buy now.
Source: The Financial Prophet
