Is Raytheon Technologies a Good Investment?
Raytheon Technologies Corporation is a spinoff of two large companies, Raytheon and United Technologies. The company makes missiles, other defense systems, drones, flight control systems, aircraft interiors for military and commercial aircraft, as well as airplane engines for both commercial and military aircraft. The company was founded in 2020 and is based in the United States.
Why You Should?
- Raytheon Technologies is a great defense play. They make drones and other defense systems for governments around the world. Raytheon Technologies is at the forefront of the defense industry, an industry that is usually safe during tough economic downturns. These factors make Raytheon Technologies a great investment.
- Raytheon Technologies has a resilient business model. As mentioned in the previous slide, Raytheon is a safe investment due to the key products that it offers to government agencies as well as other private customers. This wide consumer group will help the company go through tough economic times.
- Raytheon Technologies relies on high defense spending for most of its consistent incomes. This is an election year but I do not see defense spending to get a cut regardless of the next president and the COVID-19 Pandemic. This constant flow of revenues will help the company go through a time where its aerospace division is not doing so well.
- Raytheon Technologies has a wide range of products. In addition to defense products, they also operate Collins Aerospace, a division that makes everything from aircraft interiors to flight controls. They also operate Pratt and Whitney, another aerospace division that makes popular airplane engines found on several Boeing and Airbus airplanes like the A220 and the A320NEO family.
- Raytheon Technologies has seen rising revenues and profits over the past couple of financial years due to the factors mentioned above. This has helped it build a strong balance sheet and will help it go through tough economic times. In the financial year of 2019, the company reported revenues of around 77 billion and profits of around 5.5 billion. Both of these metrics are higher than what the company reported in the financial year of 2018 when the company reported revenues of around 66.5 billion and profits of 5.3 billion.
Why You Should Not?
- The COVID-19 Pandemic has hurt the company's aerospace division as airlines and other companies delay airplane deliveries and cancel orders for airplane interiors and airplane engines. Other countries might also further reduce their defense spending, which will further harm the company. However, all of these impacts will be in the short to mid-term.
- Raytheon Technologies has competition from other large defense juggernauts in their industry. Companies like Boeing, Lockheed Martin, and Northrop Grumman offer products that compete with the ones that Raytheon has to offer. Their aerospace division also has competition from General Electric. This might hurt the company’s future growth.
In my opinion, I think that Raytheon Technologies is a great long term investment due to the strong political background that will help the company by delivering large contracts which will offer the company with consistent revenues. The aerospace division will bounce back as soon as the impacts of the COVID-19 Pandemic start to dissipate.