Raytheon (NYSE: RTN) and Mercury Systems (NASDAQ:MRCY) are both mid-cap aerospace companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, institutional ownership, risk, valuation, profitability and analyst recommendations.

Dividends

Raytheon pays an annual dividend of $3.19 per share and has a dividend yield of 1.7%. Mercury Systems does not pay a dividend. Raytheon pays out 43.9% of its earnings in the form of a dividend. Mercury Systems has raised its dividend for 12 consecutive years.

Volatility and Risk

Raytheon has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, Mercury Systems has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500.

Profitability

This table compares Raytheon and Mercury Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Raytheon 8.68% 20.74% 7.24%
Mercury Systems 6.09% 4.87% 3.56%

Earnings and Valuation

This table compares Raytheon and Mercury Systems’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Raytheon $24.52 billion 2.19 $3.71 billion $7.26 25.44
Mercury Systems $408.59 million 5.86 $77.23 million $0.58 85.86

Raytheon has higher revenue and earnings than Mercury Systems. Raytheon is trading at a lower price-to-earnings ratio than Mercury Systems, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for Raytheon and Mercury Systems, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Raytheon 0 2 12 0 2.86
Mercury Systems 0 2 5 0 2.71

Raytheon presently has a consensus price target of $184.62, indicating a potential downside of 0.04%. Mercury Systems has a consensus price target of $42.20, indicating a potential downside of 15.26%. Given Raytheon’s stronger consensus rating and higher probable upside, research analysts plainly believe Raytheon is more favorable than Mercury Systems.

Insider and Institutional Ownership

73.8% of Raytheon shares are owned by institutional investors. Comparatively, 96.4% of Mercury Systems shares are owned by institutional investors. 0.2% of Raytheon shares are owned by insiders. Comparatively, 3.5% of Mercury Systems shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Raytheon beats Mercury Systems on 11 of the 17 factors compared between the two stocks.

About Raytheon

Raytheon Company is a technology company, which specializes in defense and other government markets. The Company develops integrated products, services and solutions in various markets, including sensing; effects; command, control, communications, computers, cyber and intelligence; mission support, and cybersecurity. The Company operates through five segments: Integrated Defense Systems (IDS); Intelligence, Information and Services (IIS); Missile Systems (MS); Space and Airborne Systems (SAS), and Forcepoint. The IDS segment develops and produces sensors and mission systems. The IIS segment provides a range of technical and professional services to intelligence, defense, federal and commercial customers. The MS segment is a developer, integrator and producer of missile and combat systems. The SAS segment is engaged in the design, development and manufacture of integrated sensor and communication systems for missions. The Forcepoint segment develops cybersecurity products.

About Mercury Systems

Mercury Systems, Inc. is a commercial provider of secure processing subsystems designed and made in the United States. The Company’s solutions support a range of defense and intelligence programs. Its technologies include embedded processing modules and subsystems, radio frequency (RF) and microwave multi-function assemblies, as well as subsystems, and RF and microwave components. It designs and builds RF and microwave components and subsystems for the electronic warfare (EW), signals intelligence (SIGINT) and other communications requirements and applications. It offers analyst services and systems engineering support, consulting, maintenance and other support, testing and installation. It designs, markets and sells software and middleware environments for the development and execution of signal and image processing applications on a range of heterogeneous and multi-computing platforms. It also offers solutions in mission computing, safety-critical avionics and platform management.

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