Table of Contents
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Company profile - leading defense, space and aerospace company
- A bit of Raytheon Technologies' history
- Overview of the competition
- A market with special features
- The last Raytheon Technologies quarterly figures from December 2024
- Raytheon Technologies stock forecast 2025
- Key figures of the Raytheon Technologies stock from the dividend analysis
- Valuation of Raytheon Technologies
- Conclusion on Raytheon Technologies stock
Armaments and the military are booming like never before. Not without reason, as rising global defense spending, driven by geopolitical tensions and new threat scenarios, is leading to a steadily growing demand for state-of-the-art defense, sensor and air defense systems. However, civil aviation is also experiencing a sustained upswing following the pandemic, supported by the trend towards global mobility and the growing need for more efficient and environmentally friendly drive technologies.
The US company Raytheon Technologies (ISIN: US9130171096) plays a significant role in precisely these markets. Tailwinds from megatrends and a merger have caused the share price of RTX, as Raytheon Technologies is abbreviated on the stock exchange, to rise by 79 percent in the last 10 years. More than half of the share price increase occurred in the past year.
Source: StocksGuide stock price
The valuation has risen accordingly. It is easily justified by the expected high growth. The following stock analysis of Raytheon Technologies will show what the risk/reward ratio of the stock looks like, what makes it so attractive at the moment and whether it is ultimately a buy.
Company profile - leading defense, space and aerospace company
With a market capitalization of around 180 billion US dollars, Raytheon Technologies is one of the world's largest companies in the aerospace and defence industry. The US group's business model is based on the development, manufacture and global distribution of highly complex technical systems for civil aviation, military applications and security-related government projects. The conglomerate is based on three central business units: Collins Aerospace, Pratt & Whitney and Raytheon. Each of these business units covers its own technological and market-strategic field and thus contributes to the Group's overall strategy in different ways.
Source: Press Release Q4/2024 Earnings RTX
Collins Aerospace
Let's move on to the largest segment, Collins Aerospace. In the 2024 financial year, it generated around 34% of revenue. At the same time, it is by far the segment with the highest margin, as the adjusted operating margin of 17% in the 2024 financial year shows. The operating result amounted to just under 4.5 billion US dollars. The division was created from the former merger of Rockwell Collins and UTC Aerospace Systems in 2018. Collins Aerospace develops and produces a wide range of highly specialized systems for civil and military aircraft. These include avionics systems, cabin interiors, flight control technologies, communication and navigation systems as well as components such as engine cowlings and landing gear.
It also supplies aircraft manufacturers such as Boeing and Airbus, as well as armed forces worldwide. In particular, it has established itself as a reliable partner in the service and maintenance business.
Pratt & Whitney
Another division of the Group is Pratt & Whitney. It is one of the best-known engine manufacturers in the world. The division stands for technological excellence in the field of jet engines. Pratt & Whitney manufactures engines for commercial, military and business aircraft, among other things. The company is particularly well known for its geared turbofan (GTF) engines, which were developed for modern aircraft such as the Airbus A320neo. They are considered to be particularly efficient and environmentally friendly. However, there have been technical problems in recent years. Nevertheless, Pratt & Whitney remains a key growth driver for Raytheon Technologies, especially in view of the global demand for efficient propulsion systems. This alone is demonstrated by the turnover of 28 billion US dollars generated in 2024. However, the operating margin here was only half as high as in the first segment.
Raytheon
The last division, Raytheon, is the smallest of all, but with a turnover share of just under 32 percent, it is anything but insignificant. Among other things, it produces air defense systems such as the well-known Patriot system, guided weapons such as the Tomahawk cruise missile and highly developed radar and sensor systems. Electronic warfare and cyber security solutions are also part of the portfolio. Raytheon primarily supplies government customers, in particular the US Department of Defense and allied NATO countries. In times of increasing geopolitical tensions, such as the war in Ukraine or the tensions in the Indo-Pacific, this area has visibly gained in importance. However, this is not yet reflected in the sales figures.
A bit of Raytheon Technologies' history
The structure of Raytheon Technologies today is the result of the merger between the two industrial giants Raytheon and United Technologies. Founded in 1922, Raytheon Company had been a leading supplier of defense technology for decades. On the other hand, United Technologies was a traditional conglomerate, best known for its activities in the aviation industry (including Pratt & Whitney and Collins Aerospace), but also included other divisions such as elevators (Otis) and air conditioning (Carrier). In order to realign itself strategically, United Technologies Corporation initially separated from both via spin-off and concentrated only on aviation. The merger with Raytheon finally brought together civil and military high technology under one roof – with the aim of exploiting synergies, broadening its base and becoming more resilient in a volatile geopolitical environment. Today, what was conceived at the drawing board is paying off.
Raytheon Technologies' business model is heavily based on long-term, often government-funded contracts, particularly in the defense sector. This can be a blessing or a curse, because a strong dependency on individual clients can lead to erratic changes in key financial figures. But the connections to Washington are good, and the projects are designed for the long term. At the same time, the company generates high revenues in the civil sector, primarily by supplying engines, aircraft systems and comprehensive maintenance services to airlines and aircraft manufacturers worldwide. Particularly attractive is the aftermarket business, i.e. the maintenance, repair and spare parts supply for systems that have already been delivered. This area is not only characterized by high margins, but is also relatively crisis-resistant. This is because aftermarket revenues are usually plannable and secured by long-term contracts, which gives the company stability.
Overview of the competition
Raytheon Technologies operates in a highly competitive environment characterized by both established corporations and specialized suppliers. The competitive situation varies greatly from one business area to the next. After all, products and services are manufactured for civil aviation as well as for military systems and defense technology.
In the commercial aviation sector, Raytheon Technologies – in particular through its Pratt & Whitney and Collins Aerospace segments – is in direct competition with companies such as General Electric (GE Aerospace) and Rolls-Royce for engines. In the field of on-board electronics, avionics systems and aircraft integration, Collins Aerospace competes with Honeywell, the French Safran and Thales. All these companies also supply the major aircraft manufacturers such as Airbus and Boeing and are fighting for market share, especially in the retrofitting, spare parts and new aircraft models. In addition to price, innovation, reliability and efficiency play a central role in competition.
Source: StocksGuide charts
The situation is different in the defense sector. Here, Raytheon Technologies, together with Lockheed Martin, Northrop Grumman, General Dynamics and Boeing Defense, is one of the Big Five in the US defense industry. They compete for multi-billion-dollar contracts from the US government and international allies. Raytheon is particularly strong in missile and air defense systems (e.g. with Patriot or NASAMS), while Lockheed Martin dominates with the F-35 fighter aircraft and Northrop Grumman with unmanned systems and radar technology. The competition is not only technologically demanding, but also geopolitically influenced. Many orders depend directly on foreign policy developments and defense budgets. In any case, it is striking that over 80 percent of sales are generated in the United States. And there is a system to this. Not only is the US defense budget gigantic, but there are also export restrictions through ITAR (International Traffic in Arms Regulations) and diplomatic factors that determine the sale of defense goods.
A market with special features
Due to its orientation, Raytheon Technologies operates in the two major global markets of aerospace and defense and security. Both markets are subject to different economic, political and technological factors. However, they develop in opposite directions to some extent, which enables a balanced and less cyclical business model.
The commercial aviation market, for example, is a cyclical growth market closely linked to global travel, trade flows, urbanization and the development of prosperity. After the pandemic-related slump in 2020 and 2021, air traffic is on the rise again from 2022. Airlines in Asia, the Middle East and parts of Africa are growing dynamically. This ultimately leads to a tendency towards high demand for new, more efficient aircraft and thus for engines, systems and maintenance services from Raytheon Technologies. The aftermarket business, i.e. the maintenance and modernization of existing fleets, also plays a central role. Raytheon Technologies benefits from long-term maintenance contracts with airlines and OEMs (Original Equipment Manufacturers) such as Airbus and Boeing. In addition, the trend towards more sustainable aviation is becoming increasingly important in times of climate change. Governments, regulatory authorities and airlines are increasingly turning to climate-friendly technologies. Demand for lower-emission engines, lighter materials and new propulsion concepts (e.g. hybrid or hydrogen propulsion) is likely to increase.
The second major market is the global defense and security sector, which is heavily influenced by geopolitical developments, security threats and national defense budgets. In recent years, it has grown worldwide, particularly due to conflicts such as the war in Ukraine, tensions in the Middle East, the rivalry between the US and China in the Indo-Pacific region, and the general modernization of many armed forces. Governments are now increasingly having to invest in air defense systems, missile defense, reconnaissance technology, electronic warfare, and cybersecurity to make up for existing shortfalls. All of these are areas in which Raytheon Technologies has a strong presence. The US market is particularly important in this regard, as the United States has the largest defense budget in the world. At the same time, however, international markets are also gaining in importance, as many countries – including in Europe – are significantly increasing their defense spending again after years of austerity. In addition, the market for dual-use technologies, i.e. technologies that can be used in both the civil and military sectors, is growing. Examples include satellite communication, drone technology, autonomous systems, sensor technology and artificial intelligence. The fusion of these two technology worlds is opening up new business opportunities.
The last Raytheon Technologies quarterly figures from December 2024
Raytheon Technologies delivered solid results overall in the past quarter. Specifically, the company posted significant revenue growth of 9 percent, driven by robust demand in the commercial aviation business and a stable performance in the defense business. Particularly encouraging was the double-digit organic growth, i.e. growth excluding the impact of divestments. This reflects broad demand for engines, aircraft systems and defense technologies.
Source: StocksGuide income statement
Despite some negative one-time effects – for example in connection with acquisitions and restructuring – Raytheon Technologies was able to increase its adjusted earnings per share compared to the previous year. The operating result of 1.8 billion US dollars underscores the fact that investments in new technologies and programs are paying off and that demand in core markets continues to grow.
Another important indicator for long-term business development is the order backlog, which is at a record level. With a total volume of 218 billion US dollars, of which 125 billion US dollars are in the civil sector and 93 billion US dollars in the defense sector, Raytheon Technologies is well utilized and has well-filled order books for the coming quarters. Despite the good figures, they are to be classified as less dynamic compared to the full year 2024. Here, revenues increased by 17 percent and net income by as much as 49 percent.
Raytheon Technologies stock forecast 2025
Raytheon Technologies is providing a positive outlook overall for the current fiscal year. The industrial and defense company expects adjusted revenues of between $83 billion and $84 billion. This corresponds to organic growth of approximately 4 to 6 percent. The forecast also assumes that the civil aviation business will continue to recover and that demand in the defense sector will remain at a high level.
Raytheon Technologies expects adjusted earnings per share of between $6 and $6.15 – a level that also indicates healthy earnings growth, particularly in comparison to the previous year. Particularly noteworthy is the continued high free cash flow. This is expected to be between $7 and $7.5 billion in 2025.
Source: StocksGuide income statement
However, when adjusted for extraordinary, significant or one-time items, full-year organic revenue growth was only 9 and 11 percent, respectively. Adjusted EPS increased by 13 percent. Overall, the figures for a large defense company can be considered solid. At its core, strong demand in civil and military aviation is driving sales growth at Pratt & Whitney and Collins Aerospace. This is supported by increased demand for spare parts and defense technologies. In addition, Raytheon Technologies benefited from geopolitical tensions, while merger-related efficiency gains enabled cost synergies of $90 million.
Source: StocksGuide sales and margin forecast
Overall, the quarter confirms Ecolab's robust positioning in a market environment characterised by innovation, customer focus and sustainability. However, Ecolab fell short of the growth momentum seen over the year as a whole. At three per cent, sales growth was slightly higher.
Current analyst forecasts paint a fundamentally growth-oriented picture for Raytheon Technologies in the coming years. It is expected that the group will be able to continuously increase its revenues – albeit at a slower pace than the current strong growth. Particularly strong growth was projected for 2024. This is mainly due to the recovery of the aviation sector and strong demand in the defense business. From 2025, however, a somewhat more moderate but still stable annual growth in the mid-single digits is expected. It is striking, however, that from 2029 onwards, sales are forecast to be almost stagnant.
Source: StocksGuide net profit & net margin
A similar picture emerges on the earnings side. Analysts expect Raytheon Technologies' net income to increase significantly in the coming years. This is an expression of increasing efficiency and better capacity utilization. From 2026, however, profit growth will flatten out again somewhat, but will remain positive.
The situation is similar for net margin. It improves continuously from just under six percent in 2024 to over nine percent in 2028. So Raytheon is not only growing, but also becoming more profitable and achieving higher margins. It is only from 2029 that a slight weakening of the dynamics can be seen, which is probably due to conservative estimates.
Key figures of the Raytheon Technologies stock from the dividend analysis
Let's move on to the dividend analysis of Raytheon Technologies, which is solid overall, if not outstanding. At around 1.8 percent, the current dividend yield is below the industry average – and does not score well in the valuation. Over the long term, things look a little better: over the last ten years, the average yield was around 2.4 percent, which earned two points in the dividend analysis.
Source: StocksGuide dividend analysis
The payout ratio over the last three years is particularly positive: with around 75 percent of profits distributed to shareholders, Raytheon scores full marks here. The continuity of the distribution is also exemplary: there have been continuous increases for 27 years. This makes the company one of the so-called dividend aristocrats – companies that have increased their dividend for at least 25 consecutive years. The dividend growth over the last five years is also impressive. At over six percent per year, it is solidly in the middle range, earning two points in the dividend analysis.
Source: StocksGuide dividend history
Valuation of Raytheon Technologies
Raytheon Technologies' valuation currently appears ambitious, but not excessive, particularly in light of the company's current growth and long-term prospects.
Source: StocksGuide key metrics
The price-earnings ratio, for example, is currently 37 based on the earnings figures of the last twelve months. This is quite high by historical and industry standards. The market therefore has high expectations for future earnings growth. However, the expected P/E ratio of around 27 shows that investors expect significant profit increases, which somewhat relativizes the current valuation level. And indeed, the strong sales growth of over 17 percent last year supports this optimistic view. It points to a strong operating performance that at least partially justifies the high P/E ratio. By contrast, the EV/FCF (enterprise value to free cash flow) ratio, which is over 47, should be viewed more critically. This is also a very high value and shows that the stock is expensive relative to the current free cash flow. Among other things, this reflects the fact that larger investments (e.g. in new technologies or production capacities) will weigh on free cash flow in the short term.
Conclusion on Raytheon Technologies stock
Raytheon Technologies is a diversified industrial and technology company with strong roots in two promising industries: civil aviation and defense technology. Long-term megatrends such as the increasing global need for security, growing air traffic and the focus on technological efficiency ensure sustained high demand for the company's products and solutions.
The solid dividend policy, a tendency towards stable earnings development and the record order backlog speak in favor of the stock. Even if the valuation may currently be rather demanding, investors with a long-term horizon find in Raytheon Technologies a company with a robust business model, a strong global market position in growth markets and a clear strategic direction.
Source: StocksGuide analyst rating
The author and/or persons or companies associated with the StocksGuide own or may own stocks in Raytheon Technologies. This post represents an expression of opinion and not investment advice. Please note the legal information.
