Trade of the Day: Raytheon Company (RTN) Stock Still on Target
Raytheon Company (NYSE: RTN ) - I last reviewed Raytheon , the fifth-largest military contractor in the world, on Nov. 17. Since then, we have seen the end of sequestration (at least temporarily), which is a benefit to all government contractors. Standard & Poor's (now CFRA) raised their 2017 EPS estimate from $7.51 to $7.55 to reflect an improving defense posture, as well as Q1 earnings of $1.73 that nicely exceeded CFRA's estimate of $1.64 and the S&P Capital IQ consensus of $1.60.
Raytheon had sales growth in all of its units, and analysts conclude that their military products meet the priorities of U.S. defense needs. CFRA's price target of $180 is based on 21.1X their 2018 EPS estimate of $8.52.
RTN stock pays an annualized dividend of $3.20 per share for a current dividend yield of 2%.
Raytheon's June-to-October consolidation evolved into a series of breakouts preceded by consolidations. I call these formations "ramp-ups" because they have a tendency to break on the upside and are usually supported by trend lines or moving averages.
On this chart, we observe support from both an intermediate support line and the 50-day moving average. Trend support is enhanced by the 200-day moving average's advance angle which is not too steep, but just right for a textbook advance. Accumulation is above average and MACD is positive.
Twin CBR buy signals from my internal indicator also support the uptrend.
Those who bought RTN in November should continue to hold, and new buyers at $158 could join them with a trading target of $185 for a proposed return of about 17%.
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