Russia’s invasion of Ukraine despatched shares of protection contractors like Raytheon (NYSE:RTX) sharply greater, as traders wager that escalating geopolitical tensions would result in ramped-up army spending. With the inventory hovering off its 52-week excessive, does RTX nonetheless characterize a shopping for alternative?
RTX Rallies as Russia Invades Ukraine
Russia invaded Ukraine on Feb. 24, sparking a day of colossal volatility on Wall Avenue. The Nasdaq whipsawed by way of a 7% swing through the session, beginning the day down by greater than 3% and ending with a achieve of greater than 3%.
In the meantime, RTX scored a modest advance through the session, rising by simply over 2%. Nonetheless, it adopted that up with two consecutive days of greater-than-4% positive factors, because the battle in Ukraine intensified and the Western nations coordinated a response. This included sanctions towards Russia and a promise by the U.S. to defend its NATO allies.
RTX’s achieve was a part of a basic rally amongst protection shares. This included a 9% rise within the iShares U.S. Aerospace & Protection ETF (BATS:ITA) for the reason that shut on Feb.23, the day earlier than Russia’s invasion. In the meantime, the SPDR S&P Aerospace & Protection ETF (NYSEARCA:XAR) superior 13% and the SPDR S&P Kensho Future Safety ETF (NYSEARCA:FITE) climbed 14%.
For its half, RTX has gained about 9% for the reason that shut on Feb. 23. The advance took the inventory to a 52-week excessive of $104.34, a part of a virtually 19% rise during the last six months. The inventory closed Wednesday at $100.74 after dipping 1.9% on the session, sitting simply off its current peak.
Is RTX a Purchase?
Whereas RTX has gotten a current increase from the Ukraine battle, and the promise of higher military spending throughout the board, the corporate has additionally seen some uncertainty these days. Like most producers, the agency has been hampered by supply chain disruptions and shortages.
In the meantime, RTX has not too long ago turn out to be the goal of a government probe into its hiring practices. On the similar time, the agency has undergone some leadership instability, together with the ouster of the chief monetary officer of its missiles unit.
Even with these headwinds, Wall Avenue analysts typically have an optimistic view of RTX. Of the 20 analysts surveyed by Seeking Alpha, 11 have a Robust Purchase score and 4 have a Purchase opinion. The remaining 5 take into account the inventory a Maintain — that means that three-quarters of the analysts have a bullish tackle the corporate.
That stated, the present common value goal of those analysts sits at $105.33. This is able to mark only a 5% rise from present ranges and the determine sits solely about 1% above its current peak. Given this comparatively conservative value goal, it is clear that almost all analysts haven’t reassessed the state of affairs for the reason that invasion began simply final week.
In the meantime, quantitative measures have a extra cautious view of the inventory. Looking for Alpha’s Quant Scores counsel the inventory ought to be seen as a Maintain. RTX will get stellar grades for profitability and momentum, scoring an A+ in every class. Nonetheless, valuation is available in at a lackluster C- and progress will get an uninspiring C+.
As for SA contributors, they echo the Wall Avenue analysts in viewing the inventory as a shopping for alternative. For example, see a report from Cappuccino Finance, which calls RTX the “stock to ride out this turmoil.”