Raytheon Company, based out of Waltham, Massachusetts, is a leader in defense, civil government and cybersecurity solutions. They operate worldwide with 64,000 employees. In 2017 alone, they had $25 billion in sales in the aerospace and defense industry. Research and development is a major component of firms within this industry. Firms must continue to reinvest to design and develop new products to stay ahead of technology advances and continuous security threats. Many firms within Aerospace and Defense operate around government contracts or subsidies due to the on-going concern of National Defense.
Raytheon exhibits similar ratios to their industry averages. They are performing better in a few aspects which leads us to believe RTN is above average when compared to their peers. Receivables turnover is higher than the industry average which infers that RTN is more efficiently collecting credit, or that they are receiving payments under contract
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This effect would lower the cost of using internal funds or equity financing. RTN currently has 18% debt in their capital structure, which is slightly less than the industry average. In comparison to the two benchmark firms, RTN is in the middle of Boeing (11% debt) and Lockheed (30% debt). RTN may also benefit from repurchasing some of its 10 billion common shares outstanding with the new funding and increase its debt tax shield.
The average industry dividend payout ratio is roughly 25%. Nearly all of the competing firms pay some sort of dividends, which indicates that their sources revenue from government contracts is fairly consistent and stable within their business models. RTN pays a higher dividend ratio among nearly all of its comparative firms, in exception to Boeing which pays 59.3% of net income as