Raytheon (RTN) Hits Fresh Highs: Is There Still Room To Run?

Have you been paying attention to shares of Raytheon Company (NYSE:RTN) ? Shares have been on the move with the stock up 6.8% over the past month. RTN hit a new 52-week high of $225.86 in the previous session. Raytheon has gained 19.8% since the start of the year compared to the 10.2% move for the Aerospace sector and the 9.5% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on January 25, 2018, Raytheon reported EPS of $2.03 versus the Zacks Consensus Estimate of $2.02 while it missed the consensus revenue estimate by 0.74%.

For the current fiscal year, Raytheon is expected to post earnings of $9.69 per share on $26.71 billion in revenues. This represents a 27.17% change in EPS on a 5.38% change in revenues. For the next fiscal year, the company is expected to earn $11.09 per share on $27.89 billion in revenues. This represents a year-over-year change of 14.45% and 4.41%, respectively.

Valuation Metrics

While RTN has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Raytheon has a Value Score of C. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 23.2X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 23.5X versus its peer group's average of 15.4X. Additionally, the stock has a PEG ratio of 2.12. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Raytheon Company currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Raytheon meets the list of requirements. Thus, it seems as though RTN shares could have potential in the weeks and months to come.

How Does Raytheon Stack Up to the Competition?

Shares of Raytheon have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Curtiss-Wright Corporation (NYSE:CW) , Northrop Grumman Corporation (NYSE:NOC) , and The Boeing Company (NYSE:BA) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 45% of all the industries we have in our universe, so it looks like there are some nice tailwinds for RTN, even beyond its own solid fundamental situation.