RTX Stock Analysis - is Raytheon Stock a Good BUY Today?- $RTX | Summary and Q&A

TL;DR

Raytheon Technologies (RTX) recently merged with United Technologies, resulting in new business segments. The company's commercial airline business may face challenges due to current travel conditions, but its defense contracts are expected to drive profits. Valuation methods suggest a fair value for RTX stock of around $72-$78 per share.

Key Insights

• 👶 The merger between Raytheon and United Technologies resulted in new business segments and the spin-off of Otis and Carrier as separate companies.
• ❓ The commercial airline industry's current challenges may impact Raytheon's Collins Aerospace segment, although defense contracts are expected to provide stability.
• 🌥️ The U.S. government is the largest customer for Raytheon Technologies, while Airbus and Boeing are also significant customers.
• 🧚 Valuation methods suggest a fair value for RTX stock of around $72-$78 per share.
• 😒 The analysis considers uncertainties and uses 2021 estimates to account for the recent merger and current market conditions.
• 🙃 The potential 25% upside in the stock's price makes it an appealing investment for the author, although they do not currently own any shares.

Transcript

hi I'm Jimmy in this video we're looking at Raytheon technologies ticker symbol RTX so we're gonna look quickly at the basics of Raytheon's business and then we're gonna dive into what their business looks like since they merged Raytheon and United Technologies to form Raytheon technologies and then we'll try to come up with a fair value for Raythe... Read More

Questions & Answers

Q: How did the merger between Raytheon and United Technologies affect their business segments?

The merger resulted in new segments for Raytheon Technologies: Missiles and Defense, and Intelligence and Space. Collins Aerospace and Pratt & Whitney remain as part of the merged company. Carrier and Otis were spun off as separate public companies.

Q: What impact will the current state of travel have on Raytheon Technologies' commercial airline business?

Given the challenges faced by the airline industry, it is likely that Raytheon's Collins Aerospace, which is tied to commercial airlines, will struggle in the next year or two. However, the defense contracts and government revenue are expected to offset some of these difficulties.

Q: Who are Raytheon Technologies' biggest customers?

The U.S. government is currently the largest customer for Raytheon Technologies, accounting for approximately 16% of the company's revenue. Airbus and Boeing are also significant customers.

Q: What valuation methods were used to determine the fair value of RTX stock?

The two valuation methods employed were discounted cash flow (DCF) valuation and free cash flow yield. DCF valuation estimated a fair value of $78 per share, while free cash flow yield estimated a fair value of $72 per share.

Summary & Key Takeaways

• Raytheon Technologies merged with United Technologies, combining their respective business segments: Collins Aerospace, Pratt & Whitney, Carrier, Otis, Missile Systems, Integrated Defense Systems, Space and Airborne, and Intelligence Information and Services.

• The commercial airline sector, specifically Collins Aerospace, may struggle in the near future due to travel restrictions and economic difficulties caused by the pandemic.

• Defense contracts, particularly with the U.S. government, are expected to be a major revenue driver for Raytheon Technologies.

• Two valuation methods were used to estimate the fair value of RTX stock: discounted cash flow valuation and free cash flow yield. Both methods suggest a fair value of around $72-$78 per share.