Summary
- Raytheon's post-earnings slump in the low $52 range created a good entry point for value investors.
- Strong cash flow increasing in 2021.
- Price target of over $90.00 explained.
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After reporting mixed quarterly results on Oct. 27, Raytheon Technologies (NYSE:RTX) fell sharply. Selling was so brisk that shares traded at lows not seen since mid-May. By the time the U.S. elections ended, the markets staged a monster rally; RTX stock rose 19% on the week.
The sub-$60 entry price came and went in a hurry this month. With the stock's dividend yield now dropping to 2.8%, investors building an aerospace and defense portfolio should continue accumulating Raytheon shares.
Market Surge Lifts Raytheon
Data by YCharts
In the last five days, the rally in Boeing (NYSE:BA), on an expected FAA approval for the 737 MAX, along with the over 5% jump in the S&P 500 (SPY), lifted Raytheon shares. For income investors, the declining dividend yield is more than offset by the stock's appreciation. Now that the political headwinds are out of the way, markets are betting that the U.S. government will not only resume military orders but also increase it. The prospects of war, small or large, in the next four years are increasing.
On its balance sheet, Raytheon's dividend coverage and cash flow are impressive. So, the one-time write-offs in the third quarter spooked investors, while creating an entry price for patient investors.
