Stock Analysis on Net

Raytheon Co. (NYSE:RTN)

$22.49

This company has been moved to the archive! The financial data has not been updated since February 12, 2020.

Economic Value Added (EVA)

Microsoft Excel

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Economic Profit

Raytheon Co., economic profit calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

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).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =


The financial data reveals several notable trends regarding the company's profitability, capital costs, invested capital, and economic profit over the five-year period from 2015 to 2019.

Net Operating Profit After Taxes (NOPAT)
NOPAT shows a generally increasing trend, rising from 2,171 million US dollars in 2015 to 3,427 million US dollars in 2019. Despite a slight dip in 2017 compared to 2016, the overall upward movement indicates improving operational profitability during this period.
Cost of Capital
The cost of capital has exhibited a gradual increase, moving from 11.59% in 2015 to 12.27% in 2019. While the changes are modest, the rising trend suggests a marginally higher required return on capital invested, potentially reflecting changes in market conditions or company risk profile.
Invested Capital
Invested capital remained relatively stable between 2015 and 2017, hovering around 22,400 to 23,500 million US dollars. However, there was a noticeable increase in 2018 and 2019, reaching 26,688 million US dollars. This growth indicates increased deployment of capital resources during the latter years of the period under review.
Economic Profit
Economic profit, representing the net value created after accounting for the cost of capital, displayed a negative trend in the initial years, with losses of 427 million US dollars in 2015 and 312 million in 2016. Despite fluctuations, including a deeper loss in 2017, economic profit improved markedly in 2018, narrowing the loss to 141 million US dollars, and turned positive in 2019 with 151 million US dollars. This progression points to enhanced value creation capabilities and better utilization of capital over time.

In summary, the data suggests that the company has been able to increase its operating profits and invested capital while facing a slightly higher cost of capital. Importantly, it has made strides from generating economic losses to achieving positive economic profit by the end of the period, implying improved operational efficiency and value generation for stakeholders.


Net Operating Profit after Taxes (NOPAT)

Raytheon Co., NOPAT calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net income attributable to Raytheon Company
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for doubtful accounts2
Increase (decrease) in equity equivalents3
Interest expense
Interest expense, operating lease liability4
Adjusted interest expense
Tax benefit of interest expense5
Adjusted interest expense, after taxes6
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income7
Investment income, after taxes8
(Income) loss from discontinued operations, net of tax9
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

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).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in equity equivalents to net income attributable to Raytheon Company.

4 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

5 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

6 Addition of after taxes interest expense to net income attributable to Raytheon Company.

7 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

8 Elimination of after taxes investment income.

9 Elimination of discontinued operations.


Net income attributable to Raytheon Company
The net income shows a generally positive trend over the five-year period. Starting at 2,074 million US dollars in 2015, there was a modest increase in 2016 to 2,211 million. However, the net income slightly declined in 2017 to 2,024 million. From 2017 onwards, the net income rose significantly, reaching 2,909 million in 2018 and further increasing to 3,343 million by the end of 2019. This pattern indicates recovery and robust growth in profitability in the latter years.
Net operating profit after taxes (NOPAT)
NOPAT also demonstrates an upward trajectory across the reported years. The value grew steadily from 2,171 million US dollars in 2015 to 2,456 million in 2016. A slight decline occurred in 2017, with NOPAT at 2,393 million, mirroring the dip seen in net income for that year. In 2018, NOPAT increased sharply to 3,010 million and continued its upward movement to 3,427 million in 2019. This trend underscores improving operational efficiency and effective tax management contributing to profit growth over the period.
Overall Trend Analysis
The data reveals a consistent improvement in both net income and NOPAT from 2015 to 2019, notwithstanding the minor setbacks in 2017. The stronger gains after 2017 suggest enhanced operational performance and possibly favorable market or internal conditions. The parallel movement between net income and NOPAT implies that the operating profits, after accounting for taxes, significantly drive the net profitability of the company.

Cash Operating Taxes

Raytheon Co., cash operating taxes calculation

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Provision for federal and foreign income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

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).


The financial data indicates a fluctuating pattern in the provisions for federal and foreign income taxes over the five-year period. Starting at 733 million US dollars in 2015, the provision increased steadily to reach a peak of 1,114 million in 2017. However, in 2018, the provision experienced a significant decline to 264 million, followed by a recovery to 658 million in 2019. This trend suggests variability in the company's taxable income or changes in tax rates or policies during these years.

Regarding cash operating taxes, the figures show a less consistent trend. The amount decreased slightly from 881 million in 2015 to 840 million in 2016, then rose to 939 million in 2017. Similar to the provision for income taxes, cash operating taxes dropped considerably in 2018 to 327 million before increasing again to 721 million in 2019. The parallel movements in both provision and cash taxes in 2018 and 2019 indicate an underlying correlation in tax strategies or tax liabilities paid.

Provision for Federal and Foreign Income Taxes
General upward trend from 2015 to 2017, followed by a sharp decline in 2018 and partial rebound in 2019
Reflects volatility possibly due to changes in earnings before tax, tax regulations, or deferred tax assets/liabilities adjustments
Cash Operating Taxes
Slight fluctuations with a significant drop in 2018 and a recovery in 2019
Movements suggest impact from operational cash flows and timing differences in tax payments
Comparison and Insights
Both tax-related figures exhibit synchronized declines in 2018, indicating potential operational or fiscal events affecting tax computations or payments during that year
The rebound in 2019 points to normalization or adjustments after an anomalous fiscal period

Invested Capital

Raytheon Co., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Commercial paper and current portion of long-term debt
Long-term debt, excluding current portion
Operating lease liability1
Total reported debt & leases
Total Raytheon Company stockholders’ equity
Net deferred tax (assets) liabilities2
Allowance for doubtful accounts3
Equity equivalents4
Accumulated other comprehensive (income) loss, net of tax5
Redeemable noncontrolling interests
Noncontrolling interests in subsidiaries
Adjusted total Raytheon Company stockholders’ equity
Short-term investments6
Invested capital

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).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of equity equivalents to total Raytheon Company stockholders’ equity.

5 Removal of accumulated other comprehensive income.

6 Subtraction of short-term investments.


Total reported debt & leases

The total reported debt and leases demonstrate a gradual declining trend over the analyzed period. Starting from 6,306 million US dollars in 2015, the figure increased slightly in 2016 to 6,421 million but began to decrease thereafter. By 2019, the total reported debt and leases had reduced to 5,679 million, reflecting a consistent effort to manage and reduce debt levels over time.

Total Raytheon Company stockholders’ equity

The stockholders’ equity shows a generally positive upward trend from 2015 to 2019. It started at 10,128 million US dollars in 2015 and experienced a minor decline through 2017, reaching 9,963 million. However, a significant recovery occurred in 2018 and 2019, with equity increasing to 11,472 million and then to 12,223 million respectively. This growth suggests an improvement in the company’s net asset base and potential retention of earnings or capital injection during these latter years.

Invested capital

Invested capital shows a steady increase over the period examined. Beginning at 22,413 million US dollars in 2015, it rose each year, attaining 23,509 million in 2016 and edging slightly upward to 23,548 million in 2017. Subsequently, there was a more pronounced increase in 2018 to 26,081 million, continuing to grow in 2019 to 26,688 million. This upward trend indicates ongoing capital investment or asset expansion, potentially supporting future growth initiatives.


Cost of Capital

Raytheon Co., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Commercial paper and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in millions

2 Equity. See details »

3 Commercial paper and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Commercial paper and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2018-12-31).

1 US$ in millions

2 Equity. See details »

3 Commercial paper and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Commercial paper and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2017-12-31).

1 US$ in millions

2 Equity. See details »

3 Commercial paper and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Commercial paper and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2016-12-31).

1 US$ in millions

2 Equity. See details »

3 Commercial paper and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Commercial paper and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2015-12-31).

1 US$ in millions

2 Equity. See details »

3 Commercial paper and long-term debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Raytheon Co., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Boeing Co.
Caterpillar Inc.
Eaton Corp. plc
GE Aerospace
Honeywell International Inc.
Lockheed Martin Corp.
RTX Corp.

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).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


The financial data reveals several key trends regarding the company's economic profit, invested capital, and economic spread ratio over the five-year period ending in 2019.

Economic Profit
The economic profit shows a generally negative trend from 2015 through 2018, initially decreasing from -427 million US dollars in 2015 to a low point of -468 million in 2017. Subsequently, there was a notable improvement in 2018, reaching -141 million US dollars, and finally turning positive to 151 million in 2019. This shift indicates a significant turnaround in economic profitability in the latest year of the period.
Invested Capital
Invested capital exhibits a steady upward trajectory throughout the duration analyzed, starting at 22,413 million US dollars in 2015 and increasing annually to reach 26,688 million US dollars in 2019. This sustained growth in capital investment suggests ongoing deployment of resources aimed at supporting business operations and potential expansion.
Economic Spread Ratio
The economic spread ratio, which measures the spread between returns and the cost of capital, has been negative for the initial four years, fluctuating between -1.99% and -0.54%. Notably, there is a consistent improvement evident, culminating in a positive spread of 0.57% in 2019. The transition from a negative to a positive spread confirms an enhancement in value creation and operational efficiency over time.

In summary, despite early challenges reflected by negative economic profits and spreads, the data indicates an improving financial condition by 2019. The positive economic profit and spread ratio, coupled with continuous investment growth, signal a strengthening economic position and suggest successful strategic initiatives or operational improvements implemented during the period.


Economic Profit Margin

Raytheon Co., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit1
Net sales
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Boeing Co.
Caterpillar Inc.
Eaton Corp. plc
GE Aerospace
Honeywell International Inc.
Lockheed Martin Corp.
RTX Corp.

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).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =

3 Click competitor name to see calculations.


The financial data reveals several notable trends in economic profit, net sales, and economic profit margin over the five-year period.

Economic Profit
The economic profit remained negative from 2015 through 2018, indicating that the company was not generating returns above its cost of capital in these years. In 2015, the economic profit was -427 million US dollars, which improved in 2016 to -312 million US dollars. However, in 2017, it again declined to -468 million US dollars. The year 2018 saw a marked reduction in losses, with the economic profit increasing to -141 million US dollars. Notably, by 2019, economic profit turned positive, reaching 151 million US dollars, signifying a turnaround and a shift to value creation.
Net Sales
Net sales demonstrated consistent growth each year without interruption, increasing from 23,247 million US dollars in 2015 to 29,176 million US dollars in 2019. This steady upward trend highlights a positive performance in sales revenue over the entire period, with approximately 25.4% total growth over five years.
Economic Profit Margin
The economic profit margin was negative during the first four years, reflecting the negative economic profit reported. It started at -1.84% in 2015, improved slightly to -1.3% in 2016, but then decreased again to -1.85% in 2017. Improvements were observed in 2018 with a margin of -0.52%, followed by a positive shift in 2019 to 0.52%, consistent with the transition to positive economic profit that year. This margin recovery signals improved operational efficiency and profitability relative to net sales.

Overall, while the company experienced challenges in generating positive economic returns in the earlier years, there was a positive trajectory noted in both economic profit and its margin by 2019. The continuous growth in net sales during the period underscores strengthening top-line performance, coupled with gradual improvements in profitability and value creation towards the end of the period analyzed.