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What Awaits Raytheon Technologies (RTX) in Q4 Earnings?

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Raytheon Technologies Corp. (RTX - Free Report) is set to release fourth-quarter 2020 results on Jan 26, before market open.

The company delivered average earnings surprise of 96.66% in the last four quarters. The Zacks Consensus Estimate for the company’s fourth-quarter earnings of 73 cents has remained unchanged over the past 30 days.

Factors to Note

On Apr 3, 2020, missile-maker Raytheon Company completed its merger with multinational conglomerate United Technologies to form aerospace and defense giant Raytheon Technologies. The combined company’s fourth-quarter results are projected to reflect better-than-expected positive synergies from the merger.

Moreover, incremental cost synergies from the previous acquisition of Rockwell Collins are also projected to benefit Raytheon Technologies’ results.

Although a slight improvement in global air travel was observed during the third quarter and a similar trend is likely to have prevailed in the fourth quarter as well, commercial aerospace business is unlikely to have reached pre-COVID air traffic levels. Therefore, adverse impacts of COVID-19 on the aerospace industry that have been affecting commercial OEM as well as commercial aftermarket sales, are expected to have once again dragged down the company’s revenues.

On the cost front, while COVID-induced expenses along with ongoing integration related costs are expected to have escalated Raytheon Technologies’ quarterly expenditures, its accelerated progress in cost mitigation actions as well as lower effective tax rate might have mitigated the overall pressure on fourth-quarter earnings.

Q4 Expectations

Currently, the Zacks Consensus Estimate for Raytheon Technologies’ earnings is pegged at 73 cents on revenues of $16.24 billion, indicating 62.4% and 16.9% decline from the respective year-ago quarter numbers, which are derived from combining the quarterly figures of legacy Raytheon and United Technologies.

Earnings Whispers

Our proven model predicts an earnings beat for Raytheon Technologies this time around. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Raytheon Technologies has an Earnings ESP of +11.47%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Upcoming Releases

Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:

Leidos Holdings (LDOS - Free Report) has an Earnings ESP of +6.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Curtiss-Wright (CW - Free Report) has an Earnings ESP of +1.50% and a Zacks Rank of 3.

Teledyne Technologies (TDY - Free Report) has an Earnings ESP of +5.86% and a Zacks Rank of 3.

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