Raytheon maintains a decline on a descending triangle – What next?

By:
on Jul 27, 2022
  • Raytheon reported higher Q2 2022 revenues, although it missed estimates.
  • The stock’s PEG ratio of 1.99 is above the industry.
  • Raytheon faces a break from a descending triangle.

Raytheon Technologies Corporation (NYSE:RTX) has been a defensive stock this year. The stock is up 3.76% year-to-date. The returns were higher when the stock traded at $105 in April, compared to the current $90. Expectations of greater defense spending due to the Ukrainian way boosted the stock. 

A critical reflection of Raytheon may suggest that investors could be cautious after the recent highs. The stock’s PEG ratio of 1.99 surpasses an average of 1.89 in the aerospace-defense industry. That suggests an overvaluation, although its closest rival Lockheed Martin has a higher 3.12 ratio.

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In earnings, Raytheon reported revenues of $16.31 billion in the second quarter. Although higher than $15.88 billion in the prior year, it missed estimates of $16.61 billion. That illustrates that investors were too optimistic about the revenues. Raytheon still beat on earnings, which came at $1.16, from $1.03 last year. The defense maker reiterated a guidance revenue of between $67.75 billion to $68.75 billion in FY22. The stock is yet to show enthusiasm after Tuesday’s financial release.

Raytheon slipping back to support after Q2 revenue miss

Source – TradingView

Technically, Raytheon is sliding along a bearish trendline. Together with the support at $89, the stock forms a descending triangle. Raytheon will need to hold at $89 and break above the bearish trendline to consider a bull case. Investors should wait before buying the stock as it faces pressure following a revenue miss.

Summary

Raytheon Technologies missed revenue estimates in Q2 despite rising from the prior year. The stock is overvalued, although not the highest in the industry. Investors should wait for a potential breakout to determine the price direction.

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