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Why Is Raytheon Technologies (RTX) Down 1.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Raytheon Technologies (RTX - Free Report) . Shares have lost about 1.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Raytheon Technologies 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 Beats on Q2 Earnings, Ups EPS View

Raytheon Technologies second-quarter 2021 adjusted earnings per share (EPS) of $1.03 outpaced the Zacks Consensus Estimate of 92 cents by 12%. However, the bottom-line figure improved 164% from the year-ago quarter’s adjusted earnings of 39 cents.

Including one-time items, the company reported GAAP earnings of 69 cents against loss of $2.56 per share in the year-ago quarter.

The year-over-year improvement in the bottom line is attributable to higher year-over-year revenues generated in the reported quarter.

Operational Performance

Raytheon Technologies’ second-quarter sales of $15,880 million beat the Zacks Consensus Estimate of $15,824 million by 0.4%. The sales figure also increased 12.9% from $14,061 million recorded in the year-ago quarter.

Total costs and expenses slipped 0.3% year over year to $14,680 million. The company generated operating profit of $1,282 million against operating loss of $3,760 million in the year-ago quarter.

Segmental Performance

Collins Aerospace: Adjusted sales at this segment improved 6% year over year to $4,545 million in second-quarter 2021 due to higher commercial OEM sales as well as commercial aftermarket sales.

Its adjusted operating income came in at $518 million compared with the year-ago quarter’s level of $24 million.

Pratt & Whitney: Adjusted sales at this segment rose 19% year over year to $4,280 million driven by sales growth in commercial aftermarket and commercial OEM.
Its adjusted operating profit was $96 million against the year-ago quarter’s operating loss of $151 million.

Raytheon Intelligence & Space: This segment recorded second-quarter sales of $3,805 million, up 12% year over year. Its operating profit was $415 million, up 34%.

Raytheon Missiles & Defense: This unit recorded sales of $3,985 million, up 15% year over year. The unit recorded $532 million of adjusted operating profit in the quarter, up 38%.

Financial Update

Raytheon Technologies had cash and cash equivalents of $8,051 million as of Jun 30, 2021,  compared with $8,802 million as of Dec 31, 2020.

Long-term debt was $29,916 million, as of Jun 30, 2021, down from $31,026 million as of Dec 31, 2020.

Net cash inflow from operating activities amounted to $1,326 million at the end of second-quarter 2021 compared with $210 million at the end of second-quarter 2020.

Its free cash flow was $1,302 million compared with $559 million at the end of second-quarter 2020.

Guidance

Raytheon Technologies raised the lower end of its revenue view for 2021. However, it has raised the earnings guidance range.

The company currently projects EPS in the range of $3.85-$4.00, compared with the earlier guidance of $3.50-$3.70. The Zacks Consensus Estimate for EPS, pegged at $3.74, lies below the newly guided range.

The company currently expects to record revenues in the band of $64.4-$65.4 billion, compared with the prior guidance of $63.9-$65.4 billion. The Zacks Consensus Estimate for revenues, pegged at $65.23 billion, is lower than the company’s new guided range.

The company currently expects to generate free cash flow in the range of $4.5-$5 billion in 2021, higher than the earlier guidance of $4.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 17.61% due to these changes.

VGM Scores

Currently, Raytheon Technologies has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Raytheon Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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