Raytheon Company (NYSE:RTN) — Raytheon is the fifth-largest military contractor in the world. It specializes in high-tech missiles, advanced radar systems, defense electronics and missile-defense systems.
With the election of Donald Trump, Standard & Poor’s opinion is that with a high priority on upgrades of military equipment, the new administration will place a high priority on missiles and missile-defense systems.
Raytheon has success in growing its backlog of orders in that area and geographically in the Middle East and Asia where S&P notes that a new arms race may be emerging. Thus S&P has raised their 12-month target price to $180 up from $140 and estimates earnings of $8.23 in 2018, up from $7.30 this year.
They note that with the Republicans winning both houses of Congress and the White House that “an end to sequestration is likely,” a benefit to the nation’s defense industry.
Raytheon experienced a consolidation from about June through October. But a positive test of the support line of a right triangle and its 200-day moving average on Nov. 7 led to a breakthrough of its 50-day moving average at $138.50. The stock then gapped from $137.37 to $142.97 with very high volume pushing it ahead.
Break-away gaps are not usually filled (retraced), but the overbought nature of MACD indicates that this gap may partially close, offering the trader an excellent opportunity at $140 or lower.
Thus try to buy RTN at $140 or lower with a 90-day objective of $170 for a proposed gain of about 20%. Raytheon’s S&P quality rating is “A,” thus it is appropriate for long-term investors.
