Raytheon Co. (NYSE:RTN)

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Raytheon Co., Profitability Ratios: Reported vs. Adjusted

Raytheon Co., adjusted profitability ratios

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net Profit Margin
Reported net profit margin	11.46%	10.75%	7.98%	9.19%	8.92%
Adjusted net profit margin	11.45%	10.75%	7.98%	9.23%	8.91%
Return on Equity (ROE)
Reported ROE	27.35%	25.36%	20.32%	21.97%	20.48%
Adjusted ROE	27.33%	25.37%	20.31%	22.06%	20.45%
Return on Assets (ROA)
Reported ROA	9.67%	9.13%	6.56%	7.36%	7.08%
Adjusted ROA	9.66%	9.13%	6.56%	7.39%	7.07%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

Between 2015 and 2019, profitability metrics exhibited a general expansion, characterized by a temporary contraction in 2017 followed by a sustained recovery and growth phase through the end of the period.

Net Profit Margin Trends: Reported net profit margins increased from 8.92% in 2015 to 11.46% by 2019. A decline to 7.98% was observed in 2017, which was subsequently reversed by a sharp increase to 10.75% in 2018 and a further rise to the period peak in 2019.
Return on Equity (ROE) Performance: ROE demonstrated a strong upward trajectory, rising from 20.48% in 2015 to 27.35% in 2019. Although a marginal decrease occurred in 2017 to 20.32%, the subsequent growth between 2017 and 2019 indicates a substantial improvement in the return generated on shareholders' equity.
Return on Assets (ROA) Dynamics: ROA mirrored the trends seen in ROE, moving from 7.08% in 2015 to 9.67% in 2019. After reaching a low of 6.56% in 2017, the ratio climbed steadily, reflecting enhanced efficiency in utilizing assets to generate earnings.
Analysis of Adjustments for Available-for-Sale Securities: The variance between reported and adjusted ratios is minimal across all measured periods. For net profit margin, ROE, and ROA, the adjusted figures differ only by fractions of a percentage point from the reported values. This indicates that the mark-to-market valuation changes of available-for-sale securities had an immaterial impact on the company's overall profitability profile during the five-year analysis window.

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	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Raytheon Company	3,343)	2,909)	2,024)	2,211)	2,074)
Net sales	29,176)	27,058)	25,348)	24,069)	23,247)
Profitability Ratio
Net profit margin¹	11.46%	10.75%	7.98%	9.19%	8.92%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Raytheon Company	3,340)	2,910)	2,023)	2,221)	2,071)
Net sales	29,176)	27,058)	25,348)	24,069)	23,247)
Profitability Ratio
Adjusted net profit margin²	11.45%	10.75%	7.98%	9.23%	8.91%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ Net profit margin = 100 × Net income attributable to Raytheon Company ÷ Net sales
= 100 × 3,343 ÷ 29,176 = 11.46%

² Adjusted net profit margin = 100 × Adjusted net income attributable to Raytheon Company ÷ Net sales
= 100 × 3,340 ÷ 29,176 = 11.45%

Raytheon Company exhibited a general upward trend in profitability between 2015 and 2019, characterized by significant growth in both absolute net income and profit margins during the latter half of the period.

Net Income Trajectory: Both reported and adjusted net income remained relatively stable between 2015 and 2017, with a slight contraction observed in 2017. However, a substantial acceleration occurred in 2018 and 2019, with adjusted net income increasing from US$ 2,023 million in 2017 to US$ 3,340 million by the end of 2019.
Adjusted Net Profit Margin Performance: The adjusted net profit margin experienced a fluctuation early in the period, dipping to 7.98% in 2017 from 9.23% in 2016. This was followed by a strong recovery and expansion, rising to 10.75% in 2018 and peaking at 11.45% in 2019, signaling improved operational efficiency and cost management.
Correlation Between Reported and Adjusted Metrics: A high degree of convergence is observed between reported and adjusted figures throughout the five-year analysis. The minimal variance between the reported and adjusted net profit margins suggests that non-recurring items or special accounting adjustments had a negligible impact on the company's bottom-line performance.

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	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Raytheon Company	3,343)	2,909)	2,024)	2,211)	2,074)
Total Raytheon Company stockholders’ equity	12,223)	11,472)	9,963)	10,066)	10,128)
Profitability Ratio
ROE¹	27.35%	25.36%	20.32%	21.97%	20.48%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Raytheon Company	3,340)	2,910)	2,023)	2,221)	2,071)
Total Raytheon Company stockholders’ equity	12,223)	11,472)	9,963)	10,066)	10,128)
Profitability Ratio
Adjusted ROE²	27.33%	25.37%	20.31%	22.06%	20.45%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ ROE = 100 × Net income attributable to Raytheon Company ÷ Total Raytheon Company stockholders’ equity
= 100 × 3,343 ÷ 12,223 = 27.35%

² Adjusted ROE = 100 × Adjusted net income attributable to Raytheon Company ÷ Total Raytheon Company stockholders’ equity
= 100 × 3,340 ÷ 12,223 = 27.33%

An analysis of the financial performance from 2015 to 2019 reveals a strong upward trajectory in both profitability and equity efficiency. While a slight contraction occurred in 2017, the subsequent two years demonstrated accelerated growth in net income and return on equity.

Adjusted Net Income Trends: Adjusted net income grew from US$ 2,071 million in 2015 to US$ 3,340 million in 2019. The growth pattern remained relatively stable between 2015 and 2017, with a minor decline to US$ 2,023 million in 2017. However, a significant surge is observed starting in 2018, where income rose to US$ 2,910 million, continuing to US$ 3,340 million by the end of 2019.
Adjusted Return on Equity (ROE) Performance: The adjusted ROE mirrors the trend seen in net income, beginning at 20.45% in 2015 and reaching 27.33% by 2019. The ratio experienced a slight dip to 20.31% in 2017 before climbing sharply to 25.37% in 2018 and peaking at 27.33% in 2019. This indicates a substantial increase in the company's ability to generate profit from its shareholders' equity over the five-year period.
Reported versus Adjusted Metrics: There is a high degree of convergence between reported and adjusted figures for both net income and ROE. The variance between the two measures is minimal across all years, suggesting that non-recurring items or accounting adjustments had a negligible impact on the overall financial results.

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	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Raytheon Company	3,343)	2,909)	2,024)	2,211)	2,074)
Total assets	34,566)	31,864)	30,860)	30,052)	29,281)
Profitability Ratio
ROA¹	9.67%	9.13%	6.56%	7.36%	7.08%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Raytheon Company	3,340)	2,910)	2,023)	2,221)	2,071)
Total assets	34,566)	31,864)	30,860)	30,052)	29,281)
Profitability Ratio
Adjusted ROA²	9.66%	9.13%	6.56%	7.39%	7.07%

Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).

2019 Calculations

¹ ROA = 100 × Net income attributable to Raytheon Company ÷ Total assets
= 100 × 3,343 ÷ 34,566 = 9.67%

² Adjusted ROA = 100 × Adjusted net income attributable to Raytheon Company ÷ Total assets
= 100 × 3,340 ÷ 34,566 = 9.66%

The financial performance from 2015 to 2019 exhibits a general upward trajectory in both profitability and asset utilization efficiency. Following a period of relative stability and a minor contraction in 2017, a substantial acceleration in financial returns is evident during the final two years of the analyzed period.

Net Income Trends: Reported net income increased from US$ 2,074 million in 2015 to US$ 3,343 million in 2019. Adjusted net income followed a near-identical path, rising from US$ 2,071 million to US$ 3,340 million. A temporary dip occurred in 2017, where reported net income decreased to US$ 2,024 million, prior to a significant expansion in 2018 and 2019.
Adjusted Return on Assets (ROA) Analysis: The Adjusted ROA reflects a growth pattern that mirrors net income, increasing from 7.07% in 2015 to 9.66% in 2019. A performance trough was observed in 2017 at 6.56%, followed by a sharp recovery to 9.13% in 2018 and a peak of 9.66% in 2019. This trend indicates an improvement in the company's ability to generate earnings from its asset base.
Comparison of Reported and Adjusted Metrics: A negligible variance exists between reported and adjusted figures across all five years. The minimal divergence between reported and adjusted net income and ROA suggests that non-recurring items or specific accounting adjustments had a marginal impact on the overall financial results during this period.

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