Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Raytheon Co., profitability ratios
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 upward trajectory, characterized by a period of relative stability followed by a notable expansion in margins and returns starting in 2018. The overall trend indicates improved operational efficiency and a strengthened ability to convert revenue into net income.
- Profit Margins
- Gross profit margins increased from 24.40% in 2015 to 26.61% in 2019, with a peak of 27.66% recorded in 2018. Operating profit margins followed a similar pattern, rising from 12.96% to 16.36% over the five-year period, with the most significant gain occurring between 2017 and 2018. Net profit margins experienced a slight contraction to 7.98% in 2017 but recovered strongly to reach a period high of 11.46% by December 31, 2019.
- Return on Investment Metrics
- Return on Equity (ROE) demonstrated significant growth, ascending from 20.48% in 2015 to 27.35% in 2019, reflecting an enhanced capacity to generate profit from shareholders' equity. Return on Assets (ROA) also showed improvement, increasing from 7.08% in 2015 to 9.67% in 2019. Both ROE and ROA experienced a simultaneous dip in 2017 before accelerating upward in the final two years of the analyzed period.
The convergence of rising operating margins and increasing returns on assets and equity suggests that the improvement in profitability was driven by both better cost management and more efficient utilization of the asset base.
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Gross Profit Margin
Raytheon Co., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross margin | 7,763) | 7,485) | 6,272) | 6,122) | 5,673) | |
| Net sales | 29,176) | 27,058) | 25,348) | 24,069) | 23,247) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 26.61% | 27.66% | 24.74% | 25.44% | 24.40% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| 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 2019 Calculation
Gross profit margin = 100 × Gross margin ÷ Net sales
= 100 × 7,763 ÷ 29,176 = 26.61%
2 Click competitor name to see calculations.
Between 2015 and 2019, a consistent upward trajectory was observed in both top-line revenue and absolute gross profit. Net sales grew steadily from 23,247 million USD to 29,176 million USD, indicating sustained growth in business volume over the five-year period.
- Gross Profit Expansion
- Absolute gross margin increased from 5,673 million USD in 2015 to 7,763 million USD in 2019. This growth in absolute profit exceeded the growth rate of net sales, suggesting an overall improvement in the company's ability to manage direct production costs relative to its revenue.
- Gross Profit Margin Percentage Trends
- The gross profit margin percentage fluctuated between 24.40% and 27.66%. Following an initial increase to 25.44% in 2016, a slight contraction occurred in 2017, bringing the margin to 24.74%. A significant peak was recorded in 2018 at 27.66%, followed by a minor correction to 26.61% in 2019.
- Efficiency Analysis
- The margin profile ended the period 221 basis points higher than the 2015 baseline. The substantial peak in 2018 indicates a period of heightened operational efficiency or a more favorable shift in the mix of high-margin contracts, while the 2019 results show a stabilization of profitability at a level higher than the 2015-2017 average.
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Operating Profit Margin
Raytheon Co., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | 4,774) | 4,538) | 3,318) | 3,240) | 3,013) | |
| Net sales | 29,176) | 27,058) | 25,348) | 24,069) | 23,247) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 16.36% | 16.77% | 13.09% | 13.46% | 12.96% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| 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 2019 Calculation
Operating profit margin = 100 × Operating income ÷ Net sales
= 100 × 4,774 ÷ 29,176 = 16.36%
2 Click competitor name to see calculations.
An analysis of the period from 2015 to 2019 reveals a consistent upward trajectory in both top-line revenue and absolute operating profitability. Net sales grew steadily from US$ 23,247 million in 2015 to US$ 29,176 million in 2019, while operating income increased from US$ 3,013 million to US$ 4,774 million over the same timeframe.
- Revenue and Income Trends
- Net sales demonstrated uninterrupted annual growth, expanding by approximately 25.5% over the five-year period. Operating income followed a similar growth pattern but experienced a more pronounced acceleration between 2017 and 2018, where it increased by approximately 36.8% in a single fiscal year.
- Operating Profit Margin Analysis
- The operating profit margin exhibited a period of relative stability between 2015 and 2017, fluctuating within a narrow range between 12.96% and 13.46%. A significant structural shift occurred in 2018, with the margin expanding to 16.77%. This indicates a substantial improvement in operational efficiency or a more favorable shift in the cost structure during that period.
- Recent Margin Stability
- Following the peak in 2018, the operating profit margin saw a slight contraction to 16.36% in 2019. Despite this marginal decline, the profitability level remained significantly higher than the benchmarks observed from 2015 to 2017, suggesting that the efficiency gains achieved in 2018 were largely sustained.
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Net Profit Margin
Raytheon Co., net profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| 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% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| 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 2019 Calculation
Net profit margin = 100 × Net income attributable to Raytheon Company ÷ Net sales
= 100 × 3,343 ÷ 29,176 = 11.46%
2 Click competitor name to see calculations.
The financial performance from 2015 to 2019 is characterized by a consistent expansion in revenue and a significant strengthening of the bottom line, resulting in an overall upward trajectory for profitability.
- Revenue Growth Trends
- Net sales demonstrated steady and uninterrupted growth over the five-year period, rising from US$ 23,247 million in 2015 to US$ 29,176 million in 2019. This consistent increase indicates a sustainable expansion of the company's top-line operations.
- Net Income Performance
- Net income attributable to the company increased from US$ 2,074 million in 2015 to US$ 3,343 million in 2019. Although a marginal decline was recorded in 2017, the subsequent growth in 2018 and 2019 was substantial, with net income increasing by approximately 44% and 15% respectively in those final two years.
- Net Profit Margin Dynamics
- The net profit margin exhibited a period of volatility followed by a strong recovery. The margin began at 8.92% in 2015, experienced a contraction to a low of 7.98% in 2017, and then expanded rapidly to reach 11.46% by 2019. The sharp increase in the margin between 2017 and 2019 suggests that net income grew at a faster rate than net sales, pointing toward improved operational efficiency, cost optimization, or a shift toward higher-margin contracts.
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Return on Equity (ROE)
Raytheon Co., ROE calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| 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% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| 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 2019 Calculation
ROE = 100 × Net income attributable to Raytheon Company ÷ Total Raytheon Company stockholders’ equity
= 100 × 3,343 ÷ 12,223 = 27.35%
2 Click competitor name to see calculations.
The financial performance from 2015 to 2019 demonstrates a positive trajectory in profitability and an improvement in the efficiency of shareholder capital utilization. An overall increase in net income, coupled with a strategic expansion of equity in the latter half of the period, resulted in a substantial rise in the return on equity.
- Net Income Trends
- Net income attributable to the company exhibited an overall upward trend, growing from US$ 2,074 million in 2015 to US$ 3,343 million in 2019. A brief decline was observed in 2017, where income fell to US$ 2,024 million, before experiencing significant acceleration in 2018 and 2019.
- Stockholders' Equity Evolution
- Total stockholders' equity remained relatively stagnant between 2015 and 2017, decreasing slightly from US$ 10,128 million to US$ 9,963 million. A shift occurred in 2018, with equity increasing to US$ 11,472 million and further rising to US$ 12,223 million by the end of 2019.
- Return on Equity (ROE) Analysis
- The return on equity increased from 20.48% in 2015 to 27.35% in 2019. While the ratio remained stable around the 20% to 22% range between 2015 and 2017, a sharp increase was recorded in 2018 (25.36%) and 2019 (27.35%). This progression indicates that the growth in net income significantly outpaced the growth of the equity base during the final two years of the period, reflecting enhanced operational efficiency and profitability.
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Return on Assets (ROA)
Raytheon Co., ROA calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| 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% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| 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 2019 Calculation
ROA = 100 × Net income attributable to Raytheon Company ÷ Total assets
= 100 × 3,343 ÷ 34,566 = 9.67%
2 Click competitor name to see calculations.
Between 2015 and 2019, a general upward trajectory in profitability and asset utilization is observed. The period is characterized by a significant acceleration in net income growth during the final two years, which outpaced the steady expansion of the total asset base, resulting in an overall improvement in the return on assets.
- Net Income Trends
- Net income exhibited a volatile but ultimately strong growth pattern. After an initial increase in 2016 and a slight contraction in 2017 to 2,024 million US$, earnings rose sharply to 2,909 million US$ in 2018 and peaked at 3,343 million US$ in 2019. This represents a substantial increase in bottom-line profitability over the five-year period.
- Total Asset Growth
- The asset base grew consistently each year, moving from 29,281 million US$ in 2015 to 34,566 million US$ by 2019. This growth was incremental and steady, indicating a controlled expansion of the company's resources.
- Return on Assets (ROA) Analysis
- The ROA fluctuated in the early part of the period, peaking slightly at 7.36% in 2016 before dropping to a period low of 6.56% in 2017. However, a sharp recovery occurred in 2018, with the ratio climbing to 9.13%, and further increasing to 9.67% in 2019. The correlation between the surge in net income and the steady growth of assets suggests a significant increase in operational efficiency and the ability to generate higher returns from each dollar of assets employed.
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