Airline sector remains weak, forcing Raytheon to cut more jobs.

$73 Billion Defense backlog.

$1 Billion accelerated cost cut plan.

Price target of over $70 explained.

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When pessimism stemming from the downturn in airlines peaked, investors who invested in the sector were rewarded for taking the risk. Delta (DAL) is up 97% from lows while American Airlines (AAL) is up 67%. In my view, Raytheon (RTX), up ~55% from the 52-week low, is one of many aerospace and defense investments to take today. In 2-3 years or more, buying the stock shortly after the pandemic-induced sell-off will pay off for patient investors.

News that Raytheon accelerated its cost-cutting plan will lift RTX stock further. Shareholders should recognize the sad situation for 15,000 positions cut in the commercial aerospace and corporate organizations. The company said the commercial aerospace recovery is too slow. With sharply lower flight volume compared to last year, Raytheon must cut costs, preserve cash, and commit to its 3% dividend yield.

There are three reasons investors should buy Raytheon.

1/ Commitment to Dividend and Debt Reduction

Raytheon ended the second quarter with $7 billion in cash and $26 billion in net debt. It has access to up to $7 billion, so liquidity is of no concern should credit markets freeze up. Its three divestitures, which brought $2 billion in net proceeds, will slim the firm down.

Below: Raytheon's stock is stuck in the $60 range, with a dividend yielding 3%.

The company reaffirmed its commitment to return $18 billion to $20 billion of capital to investors over the next four years. That implies that the dividend, which yields 3.02%, is safe. Despite shares down ~33% from 52-week highs, it will not buyback share by tapping its existing borrowing capacity. When airline customers and OEM customers have difficulty, buying buy the stock is the least responsible thing to do.