Raytheon (NYSE: RTN) and Lockheed Martin Corporation (NYSE:LMT) are both large-cap aerospace companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, earnings, risk, dividends, analyst recommendations, institutional ownership and valuation.

Insider and Institutional Ownership

73.8% of Raytheon shares are owned by institutional investors. Comparatively, 78.9% of Lockheed Martin Corporation shares are owned by institutional investors. 0.2% of Raytheon shares are owned by company insiders. Comparatively, 0.4% of Lockheed Martin Corporation shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

Raytheon pays an annual dividend of $3.19 per share and has a dividend yield of 1.7%. Lockheed Martin Corporation pays an annual dividend of $7.28 per share and has a dividend yield of 2.4%. Raytheon pays out 43.9% of its earnings in the form of a dividend. Lockheed Martin Corporation pays out 42.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Raytheon has increased its dividend for 14 consecutive years and Lockheed Martin Corporation has increased its dividend for 12 consecutive years. Lockheed Martin Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Raytheon and Lockheed Martin Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Raytheon 8.68% 20.74% 7.24%
Lockheed Martin Corporation 10.37% 221.92% 7.97%

Volatility and Risk

Raytheon has a beta of 0.58, suggesting that its stock price is 42% less volatile than the S&P 500. Comparatively, Lockheed Martin Corporation has a beta of 0.59, suggesting that its stock price is 41% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Raytheon and Lockheed Martin Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Raytheon 0 2 12 0 2.86
Lockheed Martin Corporation 0 6 7 0 2.54

Raytheon presently has a consensus target price of $184.62, suggesting a potential downside of 0.04%. Lockheed Martin Corporation has a consensus target price of $301.58, suggesting a potential downside of 2.25%. Given Raytheon’s stronger consensus rating and higher possible upside, research analysts plainly believe Raytheon is more favorable than Lockheed Martin Corporation.

Earnings & Valuation

This table compares Raytheon and Lockheed Martin Corporation’s gross 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
Lockheed Martin Corporation $49.05 billion 1.81 $6.23 billion $17.12 18.02

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

Summary

Lockheed Martin Corporation beats Raytheon 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 Lockheed Martin Corporation

Lockheed Martin Corporation is a security and aerospace company. The Company operates through four segments. Aeronautics segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Missiles and Fire Control segment provides air and missile defense systems; fire control systems; manned and unmanned ground vehicles, and energy management solutions. Rotary and Mission Systems segment provides design, manufacture, service and support for a range of military and civil helicopters; mission systems and sensors for rotary and fixed-wing aircraft; simulation and training services, and unmanned systems and technologies, among others. Space Systems segment is engaged in the research and development, design, engineering and production of satellites, strategic and defensive missile systems and space transportation systems.

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