Investment Analysis Report

Peter Stolarski

Drafted on July 28th, 2015

NYSE: RTN

What is Raytheon?

Raytheon Company is a technology and innovation leader specializing in defense, civil government and cybersecurity markets throughout the world. With a history of innovation spanning 92 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas of sensing; effects; and command, control, communications and intelligence systems; as well as a broad range of mission support services.

Leadership

The Chairman and CEO of Raytheon Company, Dr. Thomas A. Kennedy, has been with the company for 32 years. Dr. Kennedy also holds a doctorate in engineering from the University of California and is a military veteran. This combination of engineering and military experience gives him an even greater understanding of the company’s functions.

Daniel J. Crowly is the Vice President and President of Raytheon’s Integrated Defense System, a major part of its business. He has spent 5 years at Raytheon and 27 years at Lockheed Martin, a major defense company. This extensive experience in the defense industry establishes him as a strong member of the company’s leadership.

Anthony O’Brien is the Vice President and Chief Financial Officer of Raytheon. He has been with the company for 29 years and has been part of virtually every aspect of Raytheon’s business. This has given him an outstanding understanding of Raytheon and strengthens the already powerful leadership.

The other 13 individuals of Raytheon’s leadership similarly bring strong experience, understanding and a unique approach to the company. With such an experienced leadership, Raytheon gains a significant advantage over its competition.

Business Model

Products

Raytheon engages in the development and sale of the following products.

• Missile Defense Systems • Command and Control Systems (Radar, Sonar, Air Traffic Solutions etc.) • Electronic Warfare Equipement (Jammers, Anti-Radiation Missiles etc.)

• Precision Weapons (Missiles, Torpedos, Precision Guided Missiles) • Cyber Defense Technology (Malware Detection) • Training Services (Testing, Training, Design and Fabrication etc.)

Innovation on Demand

Raytheon’s Innovation on Demand services offer governments and private companies custom solutions through its world-class quantum research team. Custom made multi-sensor processing systems are currently in use by the U.S. Navy, U.K. Royal Air Force and Canadian Navy. Custom software has been in use by the North American Tactical IP Network since its creation.

The Edge

Raytheon gains a huge edge on its competition because of its Innovation on Demand services and increasing focus on 3D printing. Raytheon uses Innovation on Demand to attract ideas and late stage development research, most of which is commissioned by the buyer. Raytheon has invested a significant amount into 3D printing systems, which it uses for missile modeling. This eliminates previous costs associated to modeling which required the sluggish manual creation of missile models. In the next few decades, dedicated 3D printing facilities will leave Raytheon’s traditional modeling competition far behind.

The Performance

Product Sales

A balanced sale of products shows that the company has a powerful foothold in a steady market. With conflict increasing in the Middle East and Africa, sales are expected to increase.

Global Market Exposure

Sales in international markets have been steadily increasing, especially in the Middle East and North Africa (MENA). With the U.S. market’s share steadily rising and foreign market’s share growing significantly, Raytheon is on track for substantial growth.

Net Sales

Net Sales have been marginally decreasing, however, as represented in the next section this is simply a highlight of the company’s steadying business.

Operating Income

As represented above, although net sales have decreased, the operating income has steadily grown. This is due to the signing of long term contracts which ensure that Raytheon maintains its steady and profitable growth.

Investment Benefits

Earnings Per Share

Earnings Per Share have steadily grown over the past 5 years, which demonstrates Raytheon’s dedication to passing its earnings on to its investors. A significant amount of share buybacks guarantees that Raytheon has a personal interest in passing on its earnings.

Steady Dividends

With 11 consecutive years of noteworthy dividend growth and a recent 11% hike in dividends, Raytheon establishes itself as a secure long investment.

Rating

Zacks Rating: Sell Buckingham Research: Buy Merril Lynch: Buy Consensus Sentiment: Buy

Technical Analysis

With the technical analysis on the previous page, it is recommended to wait short term, buy mid term and hold long term.

The Verdict

Raytheon is recommended as a buy by the author. Its solid and steady growth prospects ensures stable dividends to the investor.