RTX (RTX) Down 0.3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for RTX (RTX). Shares have lost about 0.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RTX due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Raytheon Technologies Q2 Earnings Top, Sales View Raised
Raytheon Technologies’ second-quarter 2023 adjusted earnings per share (EPS) of $1.29 beat the Zacks Consensus Estimate of $1.17 by 10.3%. The bottom line also improved 11% from the year-ago quarter’s level of $1.16.
Including one-time items, the company reported GAAP earnings of 90 cents per share compared with 88 cents in the prior-year quarter.
Operational Performance
Raytheon Technologies’ second-quarter sales of $18,315 million beat the Zacks Consensus Estimate of $17,543 million by 4.4%. The figure also rose 12.3% from $16,314 million recorded in the year-ago period.
Total costs and expenses increased 12.7% year over year to $16,882 million. The company generated an operating profit of $1,458 million compared with $1,353 million in the prior-year quarter.
Segmental Performance
Collins Aerospace: Sales at this segment improved 17% year over year to $5,850 million. This improvement can be attributed to higher commercial aftermarket and commercial OEM sales, backed by strong demand across commercial aerospace end markets. Also, an increase in military sales buoyed by higher development volume boosted this segment’s top line.
Its adjusted operating income totaled $837 million compared with the year-ago quarter’s level of $617 million.
Pratt & Whitney: This segment’s sales rose 15% year over year to $5,701 million. The improvement was due to growth in the commercial aftermarket and commercial OEM businesses, backed by higher shop visit volume and content, as well as higher engine deliveries and favorable mix across both Large Commercial Engines and Pratt & Whitney Canada units.
Adjusted operating profit amounted to $436 million compared with the year-ago quarter’s level of $303 million. This was driven by drop through on higher commercial aftermarket sales and favorable large commercial OEM mix.
Raytheon Intelligence & Space: This segment recorded second-quarter sales of $3,655 million, up 2% year over year, driven by higher sales from Sensing and Effects and Cyber and Services programs.
Its adjusted operating profit totaled $297 million, down 6% from $315 million generated in the corresponding period of 2022.
Raytheon Missiles & Defense: The unit recorded sales of $4,000 million, up 12% year over year. This was driven by higher sales volume from Air Power, Advanced Technology and Land Warfare & Air Defense programs.
The segment recorded an adjusted operating profit of $427 million, up 23% from that reported in the year-ago period.
Financial Update
Raytheon Technologies had cash and cash equivalents of $5,391 million as of Jun 30, 2023, compared with $6,220 million as of Dec 31, 2022.
Long-term debt was $32,723 million as of Jun 30, 2023, up from $30,694 million as of Dec 31, 2022.
Net cash outflow from operating activities amounted to $144 million as of Jun 30, 2023, against net cash inflow worth $1,762 million at the end of second-quarter 2022.
Its free cash outflow was $1,190 million at the end of the reported quarter against free cash inflow of $844 million at the end of second-quarter 2022.
Guidance
Raytheon Technologies has updated its financial guidance for 2023.
The company still projects adjusted EPS in the band of $4.95-$5.05, up from the earlier projected range of $4.90-$5.05. The Zacks Consensus Estimate for RTX’s 2023 EPS is pegged at $5.01, which lies above the midpoint of the company’s guided range.
Raytheon Technologies also raised its revenues guidance to the band of $73-$74 billion, up from the previously projected $72-$73 million. The Zacks Consensus Estimate for revenues is pegged at $72.20 billion, which lies below the mid-point of the company’s guidance.
RTX now expects to generate free cash flow of $4.3 billion, down from the earlier projected $4.8 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -7.24% due to these changes.
VGM Scores
At this time, RTX has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, RTX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
RTX belongs to the Zacks Aerospace - Defense industry. Another stock from the same industry, Lockheed Martin (LMT), has gained 0.4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Lockheed reported revenues of $16.69 billion in the last reported quarter, representing a year-over-year change of +8.1%. EPS of $6.73 for the same period compares with $1.99 a year ago.
Lockheed is expected to post earnings of $6.71 per share for the current quarter, representing a year-over-year change of -2.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Lockheed. Also, the stock has a VGM Score of C.
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