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  • Writer's pictureIshfaaq Peerally

Raytheon Technologies Stock Analysis - Better than Boeing Stock?

Things are not really that good for aviation right now but Boeing stock $BA doubled in three months even though it crashed by 80% since 2019. But I'll argue that there's a better alternative, Raytheon Technologies $RTX . Raytheon Technologies was only recently founded after the merger of equals of Raytheon and United Technologies.

United Technologies sold its two non-aeropace businesses, Otis and Carrier, which are now traded separately. The other two subsidiaries of United Technologies, Pratt & Whitney and Collins Aerospace merged with Raytheon. This is a very interesting company since they are competing with two American giants with a lot of debts, GE and Boeing.

Ratheon Technologies has four subsidiaries:

1. Raytheon Intelligence and Space - makes sensors, radars and satellites and supplies to NASA

2. Raytheon Missiles and Defense - third largest defense contractor in the world after Lockheed Martin $LMT and Boeing

3. Pratt & Whitney - makes aircraft engines

4. Collins Aerospace - makes aircraft parts

Raytheon Technologies is a vertically integrated company with only 55% of their revenues coming from defense. Raytheon was founded by Vannevar Bush. The military part of the business is more stable than the commercial part but they can take advantage of their vertical integration to lower costs and have higher margins compared to Lockheed Martin or Boeing.

The civil aviation business has been affected as most aircraft are grounded. But if you think about the long-term, the demand will be here. They have an advantage over Boeing is that they don't make the actual planes. They only supply. They also supply to Airbus.

Raytheon Technologies has over $47 billion in debt and $17 billion in contractual obligations this year. This is nothing compared to Boeing's $94 billion in contractual obligations. But still I don't like a company with so much debt. But the good news is that most of these debts are to be repaid after 2025.

I have put Raytheon Technologies on my watchlist. It could be a good investments.

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