Contrasting Raytheon (RTN) and FLIR Systems (FLIR)

Raytheon (NYSE: RTN) and FLIR Systems (NASDAQ:FLIR) are both aerospace companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.

Dividends

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Raytheon pays an annual dividend of $3.47 per share and has a dividend yield of 1.5%. FLIR Systems pays an annual dividend of $0.64 per share and has a dividend yield of 1.2%. Raytheon pays out 45.5% of its earnings in the form of a dividend. FLIR Systems pays out 34.0% 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 increased its dividend for 13 consecutive years. Raytheon is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.



Valuation & Earnings

This table compares Raytheon and FLIR Systems’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Raytheon $25.35 billion 2.60 $2.02 billion $7.62 29.94
FLIR Systems $1.80 billion 4.02 $107.22 million $1.88 27.68

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

Insider & Institutional Ownership

73.5% of Raytheon shares are owned by institutional investors. Comparatively, 93.1% of FLIR Systems shares are owned by institutional investors. 0.2% of Raytheon shares are owned by insiders. Comparatively, 2.0% of FLIR Systems shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and target prices for Raytheon and FLIR Systems, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Raytheon 0 2 13 0 2.87
FLIR Systems 0 2 3 2 3.00

Raytheon presently has a consensus target price of $221.20, suggesting a potential downside of 3.04%. FLIR Systems has a consensus target price of $51.17, suggesting a potential downside of 1.68%. Given FLIR Systems’ stronger consensus rating and higher possible upside, analysts clearly believe FLIR Systems is more favorable than Raytheon.

Profitability

This table compares Raytheon and FLIR Systems’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Raytheon 7.98% 21.36% 7.40%
FLIR Systems 5.96% 14.54% 9.63%

Risk & Volatility

Raytheon has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500. Comparatively, FLIR Systems has a beta of 0.68, meaning that its share price is 32% less volatile than the S&P 500.

Summary

Raytheon beats FLIR Systems on 10 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.

FLIR Systems Company Profile

FLIR Systems, Inc. designs, develops, manufactures, and markets thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and threat-detection solutions worldwide. The company operates in six segments: Surveillance, Instruments, Security, OEM & Emerging Markets, Maritime, and Detection. The Surveillance segment provides enhanced imaging and recognition solutions for various military, law enforcement, public safety, and other government customers for the protection of borders, troops, and public welfare. This segment also develops hand-held and weapon-mounted thermal imaging systems. The Instruments segment offer devices that image, measure, and assess thermal energy, gases, electricity, and other environmental elements for industrial, commercial, and scientific applications. The Security segment develops and manufactures cameras and video recording systems for use in commercial, critical infrastructure, and home monitoring applications. The OEM & Emerging Markets segment provides thermal and visible-spectrum imaging camera cores and components that are utilized by third parties to create thermal, industrial, and other types of imaging systems. The segment also develops and manufactures intelligent traffic systems; imaging solutions for the smartphone and mobile devices market; and thermal imaging solutions for commercial-use unmanned aerial systems. The Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market under the FLIR and Raymarine brands. The Detection segment offers sensors, instruments, and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives threats for military force protection, homeland security, first responders, and commercial applications. The company was founded in 1978 and is headquartered in Wilsonville, Oregon.

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