Raytheon (NYSE: RTN) and Orbital ATK (NYSE:OA) are both mid-cap aerospace companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, earnings, dividends, analyst recommendations, risk, valuation and institutional ownership.

Earnings and Valuation

This table compares Raytheon and Orbital ATK’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Raytheon $24.07 billion 2.21 $2.21 billion $7.44 24.71
Orbital ATK $4.46 billion 1.72 $293.00 million $5.42 24.44

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

Risk and Volatility

Raytheon has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, Orbital ATK has a beta of 0.43, suggesting that its share price is 57% less volatile than the S&P 500.

Dividends

Raytheon pays an annual dividend of $3.19 per share and has a dividend yield of 1.7%. Orbital ATK pays an annual dividend of $1.28 per share and has a dividend yield of 1.0%. Raytheon pays out 42.9% of its earnings in the form of a dividend. Orbital ATK pays out 23.6% 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. Raytheon is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Raytheon and Orbital ATK’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Raytheon 8.77% 20.98% 7.34%
Orbital ATK 6.62% 17.32% 6.08%

Institutional & Insider Ownership

73.5% of Raytheon shares are held by institutional investors. Comparatively, 85.8% of Orbital ATK shares are held by institutional investors. 0.2% of Raytheon shares are held by insiders. Comparatively, 1.2% of Orbital ATK shares are held 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.

Analyst Recommendations

This is a breakdown of current ratings for Raytheon and Orbital ATK, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Raytheon 0 2 13 0 2.87
Orbital ATK 0 8 2 0 2.20

Raytheon currently has a consensus target price of $201.20, indicating a potential upside of 9.44%. Orbital ATK has a consensus target price of $120.07, indicating a potential downside of 9.37%. Given Raytheon’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Raytheon is more favorable than Orbital ATK.

Summary

Raytheon beats Orbital ATK on 14 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 Orbital ATK

Orbital ATK, Inc. is an aerospace and defense systems company and supplier of related products to the United States Government, allied nations, prime contractors and other customers. The Company’s segments include Flight Systems Group, Defense Systems Group, Space Systems Group and Corporate. Its products include launch vehicles and related propulsion systems; satellites and associated components and services; tactical missiles, subsystems and defense electronics, and precision weapons, armament systems and ammunition. The Flight Systems Group segment consists of Launch Vehicles Division, Propulsion Systems Division and Aerospace Structures Division. The Defense Systems Group segment consists of Armament Systems Division, Defense Electronic Division, Missile Products Division and Small Caliber Systems Division. The Space Systems Group consists of Commercial Satellites Division, Government Satellites Division, Space Components Division and Technical Services Division.

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