What happened

Shares in space, intelligence, and defense company Raytheon (NYSE:RTN) soared 43.3% in 2019, according to data provided by S&P Global Market Intelligence. Besides excellent execution by the company, the market has warmed to the idea of the upcoming merger with the aerospace businesses of United Technologies (NYSE:UTX)

Raytheon space technology.

Image source: Raytheon.

The improvement in Raytheon's performance through 2019 can be seen in the upgrade of its full-year guidance. Here's a look the full-year guidance given at the start of 2019 and the update in the third-quarter earnings report in October.

Full-Year Guidance

Current

As of January 2019

Net sales

$29.1 billion to $29.4 billion

$28.6 billion to $29.1 billion

Earnings per share from continuing operations

$11.70 to $11.80

$11.40 to $11.60

Operating cash flow from continuing operations

$4 billion to $4.2 billion

$3.9 billion to $4.1 billion

Data source: Raytheon.

Not only has Raytheon executed well off of its existing backlog, but it's also doing a good job of winning new orders. As of the third quarter, Raytheon's backlog was $44.6 billion, representing growth of 7% compared with the same period last year. Throw in billions of dollars of contracts awarded at the end of the year, and the company looks well placed to meet analyst expectations for 7% revenue growth in 2020.

So what

Since Raytheon is merging with United Technologies' aerospace businesses (Pratt & Whitney and Collins Aerospace), you could argue that Raytheon's share price is also reflecting the performance of the latter. Indeed, an analysis of United Technologies' earnings in 2019 clearly shows that its aerospace businesses are the outperformers. The commercial aviation aftermarket exceeded most expectations, and Pratt & Whitney appears to have ironed out most of its technical issues with the geared turbofan engine on the Airbus A320neo.

All told, the performance of both companies augurs well for the merger in 2020. And based on the estimates given in United Technologies' Securities and Exchange Commission filings, both stocks look like good values

Now what

Raytheon investors will be looking out for continued defense orders while keeping an eye on United Technologies' aerospace business, and the commercial aviation market in particular. United Technologies has a pretty good record of integrating acquisitions (not least Collins Aerospace and Goodrich), and Raytheon investors will be hoping that continues.