The company's rebounding commercial aviation vertical may be key to driving long-term growth
Summary
The product of a 2020 merger between Raytheon and United
Technologies, the combined company is a sprawling aerospace business spanning both
defense and commercial segments.
While initially panned by many investors, the merger has
lately shown signs of paying off.
Raytheon's commercial aviation business, inherited from
United Technologies, contributed significantly to its earnings beat last
quarter.
If Raytheon can sustain both its defense and commercial
verticals, it could surpass Boeing and Lockheed Martin on a revenue basis.
Raytheon Technologies Corp. (RTX, Financial) has been a
mainstay of the aerospace industry for decades, yet it has frequently found
itself overshadowed by its larger peers, especially the sprawling Boeing Co.
(BA, Financial) and the dynamic Lockheed Martin Corp. (LMT, Financial). That
may soon change, however, if current trends persist.
Synergies and disruptions
Raytheon was already a large and varied organization even
before it merged with United Technologies Corp. last year. As I discussed in
January, the merger resulted in a far larger and more complex organization; so
much so, in fact, that a number of prominent analysts and investors expressed
considerable skepticism about the deal. Raytheon’s leadership was unperturbed,
however. Speaking at the 2019 Paris Air Show soon after the merger was
announced, Raytheon’s then-Chief Financial Officer Anthony O'Brien highlighted
the key benefits of adding United Technologies’ commercial aviation
capabilities to Raytheon’s respected defense business:
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