Notable Calls

- Cowen is out with a call saying Raytheon (NYSE:RTN) is their best idea for the currently volatile equity market based on:

1) immunity to credit market turmoil (no commercial exposure, net cash position) and;

2) projected 15%+ EPS growth through 2009 from rising foreign sales, share buyback, and easing pension expense; and there's up to 35c of upside to Cowen's above-consensus 2009 EPS projection of $4.65 from more aggressive buyback, mix- related margin upside, and higher pension returns.

RTN also should offer more consistent "organic" sales growth than peers of @ 6% than peers (foreign growth; electronics hold up in weapons downturns) and less headline risk than platform builders from a critical Democratic Congress. Nevertheless, RTN commands a below-average 40% net buy ratio and sells for a peer-low 13.0x 2008 "economic" P/E, with a healthy 7.6% cash flow yield. This gives it potential to outperform the market by 15%+ in 6-12 months. Possible triggers include:

1) new business wins (mainly international)
2) strong Q3 results/share repurchase, and
3) expanded buyback authorization at RTN's fall board meeting.

Bolstered Stock Repurchase Potential. RTN exited Q2 with a peer-hi $3B in cash, $1.6B+ in H2 cash flow, & $611MM remaining repurchase authorization. Given it bought 6MM shares in June @ $55.21/sh., it's apt to be an active buyer in Q3, particularly on dips. RTN's working capital/tax initiatives could bolster cash flow to enable additional buyback.

Notablecalls: RTN may indeed represent a safe haven here and the almost 8% cash flow yield makes it very buyable. The chart looks like the stock may have 1-2 bucks of upside in it over the next couple of days.