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What Awaits Raytheon Technologies (RTX) in Q1 Earnings?

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Raytheon Technologies Corp. (RTX - Free Report) is set to release first-quarter 2021 results on Apr 27, before market open.

The company delivered an earnings surprise of 96.36% in the last four quarters, on average. The Zacks Consensus Estimate for the company’s first-quarter earnings of 88 cents has improved 22.2% over the past 60 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 first-quarter results are projected to benefit from better-than-expected positive synergies from the merger.

Incremental cost synergies from the previous acquisition of Rockwell Collins are also expected to bolster Raytheon Technologies’ results.

With respect to revenue expectation, consistent aftermarket volume reduction is expected to have hurt Raytheon Technologies’ first-quarter 2021 top-line performance. A slight improvement in global air travel has been observed over the past couple of quarters and a similar trend is likely to have prevailed in the first quarter as well. However, the commercial aerospace business is unlikely to have reached pre-COVID air traffic levels. Therefore, adverse impacts of COVID-19 on the commercial 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 overall revenues.

On the cost front, accelerated progress in cost mitigation actions as well as lower effective tax rate have been contributing favorably to Raytheon Technologies’ bottom-line performance. However, significant aftermarket volume reductions and fixed cost headwinds are expected to have escalated the company’s overall quarterly expenditures, thereby offsetting its cost reduction efforts and in turn hurting its quarterly earnings performance.

Q1 Expectations

Currently, the Zacks Consensus Estimate for Raytheon Technologies’ earnings is pegged at 88 cents on revenues of $15.38 billion, indicating 50.6% and 15.6% 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 does not conclusively predict an earnings beat for Raytheon Technologies this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for earnings beat. This is not the case here, as given below

Earnings ESP: Raytheon Technologies has an Earnings ESP of 0.00%. 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 #2.

Stocks to Consider

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:

Moog Inc (MOG.A - Free Report) has an Earnings ESP of +8.41% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Triumph Group (TGI - Free Report) has an Earnings ESP of +9.80% and a Zacks Rank #3.

Boeing (BA - Free Report) has an Earnings ESP of +5.55% and a Zacks Rank #3.  

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