December 28, 2021

Raytheon Technologies: America's Next Top Aerospace Company?

 

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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