Northrop Grumman (NYSE: NOC) and Raytheon (NYSE:RTN) are both large-cap aerospace companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, risk, earnings, institutional ownership, analyst recommendations, profitability and dividends.
Institutional and Insider Ownership
80.8% of Northrop Grumman shares are held by institutional investors. Comparatively, 73.5% of Raytheon shares are held by institutional investors. 0.6% of Northrop Grumman shares are held by insiders. Comparatively, 0.2% of Raytheon shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
This table compares Northrop Grumman and Raytheon’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Northrop Grumman pays an annual dividend of $4.40 per share and has a dividend yield of 1.3%. Raytheon pays an annual dividend of $3.47 per share and has a dividend yield of 1.5%. Northrop Grumman pays out 33.1% of its earnings in the form of a dividend. Raytheon pays out 45.5% 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. Northrop Grumman has increased its dividend for 10 consecutive years and 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 Northrop Grumman and Raytheon’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Northrop Grumman||$25.80 billion||2.37||$2.02 billion||$13.28||26.49|
|Raytheon||$25.35 billion||2.56||$2.02 billion||$7.62||29.54|
Raytheon has lower revenue, but higher earnings than Northrop Grumman. Northrop Grumman is trading at a lower price-to-earnings ratio than Raytheon, indicating that it is currently the more affordable of the two stocks.
This is a summary of current recommendations and price targets for Northrop Grumman and Raytheon, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Northrop Grumman currently has a consensus target price of $363.36, suggesting a potential upside of 3.30%. Raytheon has a consensus target price of $219.87, suggesting a potential downside of 2.32%. Given Northrop Grumman’s higher probable upside, equities analysts plainly believe Northrop Grumman is more favorable than Raytheon.
Risk and Volatility
Northrop Grumman has a beta of 0.77, suggesting that its stock price is 23% less volatile than the S&P 500. Comparatively, Raytheon has a beta of 0.7, suggesting that its stock price is 30% less volatile than the S&P 500.
Northrop Grumman beats Raytheon on 9 of the 17 factors compared between the two stocks.
About Northrop Grumman
Northrop Grumman Corporation operates as a security company for government and commercial customers worldwide. It provides products, systems, and solutions in autonomous systems; cyber; command, control, communications and computers, intelligence, surveillance, and reconnaissance (C4ISR); strike; and logistics and modernization. The company operates through three segments: Aerospace Systems, Mission Systems, and Technology Services. The Aerospace Systems segment designs, develops, integrates, and produces manned aircraft, autonomous systems, spacecraft, high-energy laser systems, microelectronics, and other systems/subsystems. This segment sells its products primarily to the Department of Defense (DoD) and other U.S. government agencies for use in various areas, including intelligence, surveillance, and reconnaissance; strike operations; communications; earth observation; and space science and exploration. The Mission Systems segment offers mission solutions and multifunction systems, including C4ISR systems; radar, electro-optical/infrared, and acoustic sensors; electronic warfare systems; cyber solutions; space systems; intelligence processing systems; air and missile defense integration; navigation; and shipboard missile and encapsulated payload launch systems for the DoD, intelligence community, international, federal-civil, and commercial customers. The Technology Services segment provides software and system sustainment, training, and integrated logistics support solutions, as well as engages in the modernization of platforms and associated subsystems. Northrop Grumman Corporation was founded in 1939 and is based in Falls Church, Virginia.
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.
Receive News & Ratings for Northrop Grumman Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Northrop Grumman and related companies with MarketBeat.com's FREE daily email newsletter.