Why Raytheon Stock Is 'Poised To Strike' In UBS's Eyes

• Raytheon Company RTN shares have risen more than 11 percent over the past three months.
• David E. Strauss of UBS has upgraded the rating from Neutral to Buy, while raising the price target from $111 to $118.
• Strauss believes that the company is well positioned to begin growing once more, with an improving margins.

Analyst David Strauss also expects “upside to cash generation on working capital opportunity, pension and lower cash taxes,” while Raytheon’s improving free cash flow and under-leveraged balance sheet would help the company return higher cash levels in future.

Following six years of moving below, Raytheon’s booking have now moved ahead of its revenues, “driven by international growth while domestic bookings have stabilized,” the UBS report stated.

Strauss also expects the company’s margins to improve, driven by growth and an improved mix at IDS and the Websense restructuring having been completed.

“While most of its cash pension tailwind in 2015 is being offset by much higher cash taxes and working capital, we forecast FCF growth accelerating into 2016,” Strauss said, while mentioning that the company’s working capital growth was expected to moderate going forward.

Strauss believes that the share price could have upside potential to $140.