Raytheon Company

Raytheon Company was a major American industrial corporation and defense contractor that, until 2020, was one of the world's largest producers of guided missiles and integrated defense systems. Founded in 1922, the company built a formidable reputation on a foundation of technological innovation, spanning from consumer electronics in its early days to highly advanced military hardware. Its business was primarily centered on developing and manufacturing state-of-the-art weapons, command and control systems, and sophisticated sensors and electronics for government and military clients globally. For a value investor, the historical Raytheon represented a classic “wide moat” business, protected by long-term government contracts, high technological barriers to entry, and a brand synonymous with national security. In April 2020, the original Raytheon Company ceased to exist as a standalone entity when it completed a blockbuster merger with United Technologies Corporation (UTC) to form a new aerospace and defense giant, initially named Raytheon Technologies Corporation and later rebranded as RTX Corporation.

The story of Raytheon is one of constant evolution, adapting from a small electronics startup to a cornerstone of the global defense industry. Understanding its history provides crucial context for the behemoth it has become today.

Raytheon's journey began in Cambridge, Massachusetts, as the American Appliance Company. Its early focus was on refrigeration technology, but it soon pivoted to electronics. A fun piece of trivia: a Raytheon engineer's accidental discovery that magnetrons could heat food led to the invention of the microwave oven! However, the company's destiny was forged during World War II and the subsequent Cold War. It became a critical supplier of radar systems and, most famously, guided missiles. Iconic products like the Patriot air and missile defense system and the Tomahawk cruise missile became household names in military circles, cementing Raytheon's role as a vital partner to the U.S. Department of Defense and its allies.

The 2020 “merger of equals” with United Technologies Corporation was a game-changer. The deal combined Raytheon's defense-focused portfolio with UTC's massive aerospace businesses, creating a company with unparalleled scale and scope. The goal was to create a diversified powerhouse that could weather cycles in both commercial aviation and defense spending. The newly formed company, now known as RTX Corporation, was structured into three main segments:

• Collins Aerospace: A leader in avionics, interiors, and mechanical systems for commercial and military aircraft.
• Pratt & Whitney: One of the world's top manufacturers of aircraft engines for both commercial airliners and fighter jets.
• Raytheon: The legacy defense business, continuing its focus on missiles, sensors, and cyber warfare solutions.

For investors, the original Raytheon was a compelling case study. The modern RTX Corporation inherits and magnifies many of the same qualities that value investors cherish.

RTX possesses a powerful economic moat, a durable competitive advantage that protects its long-term profits. This moat is built on several key pillars:

• Intangible Assets: The company holds a vast portfolio of patents and proprietary technology. Its brands—Raytheon, Collins, and Pratt & Whitney—are synonymous with quality and reliability in industries where failure is not an option.
• High Switching Costs: It is incredibly difficult, expensive, and time-consuming for customers to switch suppliers. An airline can't simply swap out its entire fleet's Pratt & Whitney engines, and a nation can't easily replace its integrated Patriot missile defense system with a competitor's product.
• Government Relationships: The company has deep, decades-long relationships with governments around the world, particularly in the United States. These long-cycle contracts provide a predictable and stable stream of revenue.

No investment is without risk. When analyzing RTX, a prudent investor must consider several factors:

• Government Spending Dependency: A significant portion of the company's revenue depends on national defense budgets. Political shifts, changes in geopolitical tensions, or budget cuts can directly impact its bottom line.
• Execution Risk: Managing a company of this size and complexity is a monumental task. Integrating the legacy businesses, managing vast global supply chains, and avoiding costly program delays or quality control issues (like recent challenges with certain jet engines) are persistent risks.
• Competitive Landscape: While the industry is an oligopoly, RTX still faces fierce competition from other giants like Lockheed Martin, Northrop Grumman, and Boeing for major government contracts.

For anyone looking to invest today, the target is RTX Corporation (stock ticker: RTX), not the historical Raytheon Company. In 2023, the company rebranded from Raytheon Technologies to RTX to signify its integrated identity and forward-looking focus on technology. It stands as a well-diversified giant, with its fortunes tied to the long-term growth of both commercial air travel and the ever-present global need for defense and security. Its balanced portfolio is designed to provide stability, making it a compelling, if complex, subject for any serious value investor's research.