Raytheon (NYSE:RTN) CEO William Swanson announced today that he will vacate his office at the end of March -- immediately sidelining Raytheon stock, which is sitting out today's stock market rally.

Raytheon's Tomahawk cruise missile. Source: Wikimedia Commons.

Should investors be worried? Is this a sign that Swanson sees no future for Raytheon in a world of shrinking defense budgets and wants to quit while the quitting is good?

As a matter of fact, no. It's no sign of the sort. And I'll tell you why.

Stellar returns...
While hitting the eject button on his CEO's chair, Swanson isn't cutting all ties to the company he's led for the past decade. He'll remain chairman of Raytheon, and in that capacity plans to help ease the transition of new CEO -- and 30-year Raytheon veteran -- Thomas Kennedy. This is, incidentally, Kennedy's second significant promotion at the company in less than a year. Evidently, Raytheon has been rushing him to the top just as quickly as it can. This fact alone should lay to rest fears that Swanson sees no future for the firm.

It's also worth noting that Swanson has done a pretty fantastic job at Raytheon, shares of which have tripled in value over the past decade and beat the S&P 500 by a factor of more than two over this past year -- gaining nearly 58%.

RTN One-Year Price Returns data by YCharts.

...from a superior business
Swanson's also leaving his successor a company in fine financial fettle, boasting just:

  • $830 million in net debt on a $29.2 billion market cap
  • 12.2% operating profit margins that are near the top of its group (among defense contractors, only Northrop Grumman (NYSE:NOC) earns fatter profit margins), and
  • prospects for earnings growth that lag only Huntington Ingalls (NYSE:HII) and Boeing (NYSE:BA).

And that last point isn't even a fair comparison, given that Boeing isn't a pure-play defense contractor, and gets a lot of its profits from a dominant commercial business. What is fair to point out is that out of all the pure-play defense contractors in the market today, no single company is better placed than Raytheon to weather continued cuts in U.S. defense spending.

With more than $1 in every $4 it collects coming from sales outside the company, Raytheon is the single most diversified defense contractor you can buy today. Its 25.5% foreign-revenue percentage leads No. 2 General Dynamics (NYSE:GD) by nearly five full percentage points -- and leaves the rest in the dust.

Data source: S&P Capital IQ. 

Perhaps best of all, Raytheon is able to sit back and watch as its peers Northrop, Boeing, and Lockheed duke it out for pole position on the list of the top 10 fighter jets in the world. Because "everybody needs bullets," Raytheon can sit back and sell rockets and missiles to all comers, no matter where they are in the world -- and no matter whose fighter jets they want to load the ammo onto.

As when it comes to "job security" for Raytheon and investment security for Raytheon shareholders, that's a pretty nice position to be in.