Please ensure Javascript is enabled for purposes of website accessibility

Why Raytheon, General Dynamics, and United Technologies Stocks All Fell 10% Today

By Rich Smith - Mar 23, 2020 at 1:46PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Coronavirus relief bill fails in Congress.

What happened

Congressional and White House plans to bail out companies crushed by the novel coronavirus and to mail out billions of dollars' worth of relief cash to workers either laid off from work or confined to quarters under stay-at-home orders collapsed over the weekend.

With the Coronavirus stimulus bill lacking support from Democrats in the Senate and several key Republican senators self-quarantined, the relief package failed in the Senate late Sunday -- and now industrial stocks are suffering the consequences.

As of 12:25 p.m. EDT Monday, shares of Raytheon (RTN) are down 10%, United Technologies (RTX -2.55%) 10.1%, and General Dynamics (GD -3.63%) 8.8%. All three stocks were down more than 10% in trading earlier today.

3 red arrows going down and crashing through the floor.

Image source: Getty Images.

So what

So what went wrong? According to Senate Minority Leader Charles Schumer, the Republican-sponsored bill contained a "large corporate bailout with no protections for workers and virtually no oversight." Senate Democrats want to "add protections for workers, to expand unemployment insurance to four months at 100% pay and increase aid to hospitals, state and local governments," reports The Wall Street Journal, and to pare back loan guarantees for industry.

They're planning to make a second attempt to reach a compromise with the Republicans and pass a revised bill today. Meanwhile, a competing bill is being pushed in the House by Speaker Nancy Pelosi.

Now what

Even before a relief package is passed, however, there could be some hope for these stocks. In a note this morning, analysts at investment bank JP Morgan argued that United Technologies stock, at least, has been oversold after a 45% pullback.

Yes, there's a "clear and present" danger to United Tech's earnings, said the banker. But the company's merger with Raytheon remains on track, and concerns about their respective balance sheets might be overstated. As my fellow Fool Lou Whiteman explained last year, United Technologies will be paying only shares for Raytheon -- not cash. So in theory, at least, the two companies won't end up any more burdened by debt together than they would have been separately. Indeed, as Lou pointed out, Raytheon and United Technologies expect to save "more than $1 billion in cost synergies by the end of the fourth year."

The sooner these companies get their deal done, the better they should be able to withstand the coming recession.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
RTX
$90.25 (-2.55%) $-2.36
General Dynamics Corporation Stock Quote
General Dynamics Corporation
GD
$217.78 (-3.63%) $-8.20
Raytheon Company Stock Quote
Raytheon Company
RTN

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.