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Raytheon Company (NYSE: RTN ) fits the bill of a strong company that is growing while still boasting an attractive valuation. You're probably familiar with the name, as Raytheon is a well-known and well-positioned aerospace and defense company with 64,000 employees and customers in more than 80 countries.
RTN is the world's largest producer of guided missiles, including the Patriot Missile that was such a prominent part of the Persian Gulf War in 1991 as it shot down Scud missiles coming in from Iraq.
This company is in a great position going forward for a number of reasons, including the fact that the recently approved federal budget allocates $700 million to defense, a significant $61 billion increase over last year. Current plans call for an additional $16 billion increase next year, as many think the military needs to improve its readiness.
In fact, Raytheon is just now starting to work on a $600 million contract to modernize missile defense systems as well as other strategic software and hardware systems. That contract is expected to add 800 new jobs in the Huntsville, Alabama area.
The company reported solid first-quarter results on April 26, and I liked what I saw. Earnings came in at $2.20-per-share, topping estimates for $2.11, and revenue of $6.27 billion was also ahead of the Street. Operating cash flow really jumped to $238 million from a loss of $41 million, and order backlog was nearly 6% higher than a year ago at $38.1 billion.
Looking ahead, management guided for 2018 revenue of $27 billion and earnings of $9.70-$9.90-per-share. Prior guidance was $9.55-$9.75, and the Street is currently at $9.72. That will probably come up.
Hit on Earnings
Unfortunately, the stock took a hit as the first-quarter reporting cycle was an environment in which any disappointment was met with severe selling due to Wall Street's high expectations. The following day, RTN fell below its 50-day moving average on above-average volume.
RTN stock has been stuck in a downtrend after firmly breaking below its 200-day moving average; however, with the company set to report its next round of earnings on July 26, we could see a big turnaround in the shares that sends it back above its key levels and brings buyers back in.
Right now, Raytheon earnings are expected to come in at $2.35-per-share, up significantly from $1.89 last year, on a 3.7% increase in revenue to $6.52 billion. For all of 2018, expectations are for earnings of $9.91-per-share on a 5.6% rise in revenue to $26.78 billion.
In the meantime, the chart is beginning to shape up. The stock has recently printed a series of higher closes and found good support around $192. As I said, earnings could get the stock firing on all cylinders, so now is the time to jump in if you want to own RTN stock while it's still cheap.
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