Raytheon (NYSE: RTN) and L-3 Communications Holdings (NYSE:LLL) are both large-cap aerospace companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, dividends, analyst recommendations, risk, profitability, institutional ownership and earnings.

Profitability

This table compares Raytheon and L-3 Communications Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Raytheon 8.68% 20.74% 7.24%
L-3 Communications Holdings 6.44% 14.15% 5.60%

Valuation & Earnings

This table compares Raytheon and L-3 Communications Holdings’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Raytheon $24.52 billion 2.24 $3.71 billion $7.26 26.02
L-3 Communications Holdings $10.90 billion 1.35 $1.32 billion $8.87 21.29

Raytheon has higher revenue and earnings than L-3 Communications Holdings. L-3 Communications Holdings is trading at a lower price-to-earnings ratio than Raytheon, indicating that it is currently the more affordable of the two stocks.

Dividends

Raytheon pays an annual dividend of $3.19 per share and has a dividend yield of 1.7%. L-3 Communications Holdings pays an annual dividend of $3.00 per share and has a dividend yield of 1.6%. Raytheon pays out 43.9% of its earnings in the form of a dividend. L-3 Communications Holdings pays out 33.8% 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 raised its dividend for 12 consecutive years and L-3 Communications Holdings has raised its dividend for 13 consecutive years.

Volatility and Risk

Raytheon has a beta of 0.59, suggesting that its stock price is 41% less volatile than the S&P 500. Comparatively, L-3 Communications Holdings has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Raytheon and L-3 Communications Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Raytheon 0 1 14 0 2.93
L-3 Communications Holdings 0 7 4 1 2.50

Raytheon currently has a consensus target price of $192.79, suggesting a potential upside of 2.05%. L-3 Communications Holdings has a consensus target price of $190.56, suggesting a potential upside of 0.92%. Given Raytheon’s stronger consensus rating and higher probable upside, research analysts clearly believe Raytheon is more favorable than L-3 Communications Holdings.

Institutional and Insider Ownership

73.7% of Raytheon shares are held by institutional investors. Comparatively, 79.1% of L-3 Communications Holdings shares are held by institutional investors. 0.2% of Raytheon shares are held by company insiders. Comparatively, 2.9% of L-3 Communications Holdings shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Raytheon beats L-3 Communications Holdings on 11 of the 18 factors compared between the two stocks.

Raytheon Company Profile

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.

L-3 Communications Holdings Company Profile

L3 Technologies, Inc., formerly L-3 Communications Holdings, Inc., is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment, simulation and training, night vision and image intensification equipment and security and detection systems. The Company provides a broad range of communication and electronic systems and products used on military and commercial platforms. It operates through four segments: Electronic Systems, Aerospace Systems, Communication Systems and Sensor Systems. Electronic Systems provides a broad range of products and services for military and commercial customers in several niche markets across several business areas. Aerospace Systems delivers integrated solutions and provides engineering, modernization, upgrade, sustainment, and maintenance and logistics support. Communication Systems delivers products and services for the global communications market. Sensor Systems provides diverse sensor technologies.

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