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NEW YORK (TheStreet) -- Raytheon (RTN) - Get Raytheon Company Report jumped 3.5% to $95.07 Friday after receiving an upgrade from analyst firm Sterne Agee.

The firm upgraded the arms producer to "buy" from "hold," and raised its price target to $114 from $92. Analyst Peter Arment wrote that the upgrade is due to "our view that defense stocks have increased domestic visibility since the budget deal coupled with higher international sales ramping to bridge domestic softness."

The upgrade comes one day after Raytheon announced its fourth quarter earnings report. The company posted earnings of $1.46 a share for the quarter. Analysts surveyed by Thomson Reuters estimated $1.35 a share for the quarter.

Raytheon missed revenue estimates, however, reporting revenue of $5.87 billion for the quarter. Analysts expected $5.95 billion in revenue.

TheStreet Recommends

TheStreet Ratings team rates RAYTHEON CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate RAYTHEON CO (RTN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, RTN's share price has jumped by 56.52%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RTN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The current debt-to-equity ratio, 0.54, is low and is below the industry average, implying that there has been successful management of debt levels.
  • RAYTHEON CO reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RAYTHEON CO increased its bottom line by earning $5.66 versus $5.24 in the prior year. This year, the market expects an improvement in earnings ($5.85 versus $5.66).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Aerospace & Defense industry and the overall market on the basis of return on equity, RAYTHEON CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: RTN Ratings Report