A month has gone by since the last earnings report for Raytheon Technologies (
RTX Quick Quote RTX - Free Report) . Shares have lost about 4.1% 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 the most recent earnings report in order to get a better handle on the important drivers.
Raytheon Technologies' Q1 Earnings Beat, Sales Up Y/Y
Raytheon Technologies Corporation’s first-quarter 2023 adjusted earnings per share (EPS) of $1.22 beat the Zacks Consensus Estimate of $1.11 by 9.9%. The bottom line also improved 6% from the year-ago quarter’s adjusted earnings of $1.15 per share.
Including one-time items, the company reported GAAP earnings of 97 cents per share compared with 74 cents recorded in the prior-year quarter.
Raytheon Technologies’ first-quarter sales of $17,214 million beat the Zacks Consensus Estimate of $16,857 million by 2.1%. The sales figure also rose 9.5% from $15,716 million recorded in the year-ago quarter.
Total costs and expenses increased 6.7% year over year to $15,650 million. The company generated an operating profit of $1,652 million compared with $1,080 million in the prior-year quarter.
Segmental Performance Collins Aerospace: Sales at this segment improved 16% year over year to $5,581 million. This improvement can be attributed to higher commercial aftermarket and commercial OEM sales, backed by continued recovery of air traffic. Also, an increase in military sales boosted this segment’s top line.
Its adjusted operating income came in at $800 million, compared with the year-ago quarter’s level of $584 million. This was driven by higher commercial aftermarket volume and a favorable mix.
Pratt & Whitney: This segment’s sales rose 15% year over year to $5,230 million. The improvement was due to growth in the commercial aftermarket and commercial OEM businesses, backed by continued recovery and higher volume across both Large Commercial Engines and Pratt & Whitney Canada. Higher F135 sustainment volume and higher military sales on account of F135 production contract award also boosted the segment’s revenues.
Adjusted operating profit was $434 million compared with the year-ago quarter’s level of $308 million. This was driven by drop through on higher commercial aftermarket sales, a favorable contract matter and higher military sales.
Raytheon Intelligence & Space: This segment recorded first-quarter sales of $3,565 million, almost flat year over year, as lower volumes from Command, Control and Communications programs got offset by higher volumes from Cyber and Services programs.
Its adjusted operating profit was $330 million, which declined 13% on account of lower net program efficiencies.
Raytheon Missiles & Defense: The unit recorded sales of $3,671 million, up 4% year over year. This was driven by higher sales in Advanced Technology and Air Power programs.
The segment recorded an adjusted operating profit of $335 million, down 13% from that reported in the year-ago period.
Raytheon Technologies had cash and cash equivalents of $5,893 million as of Mar 31, 2023, compared with $6,220 million as of Dec 31, 2022.
Long-term debt was $32,717 million as of Mar 31, 2023, up from $30,694 million as of Dec 31, 2022.
Net cash outflow from operating activities amounted to $863 million as of Mar 31, 2023, compared with $476 million at the end of first-quarter 2022.
Its free cash outflow was $1,383 million at the end of first-quarter 2023, against free cash inflow of $37 million at the end of first-quarter 2022.
Raytheon Technologies has reiterated its financial guidance for 2023.
The company still projects adjusted EPS in the range of $4.90-$5.05. The Zacks Consensus Estimate for Raytheon’s 2023 EPS, pegged at $5.01, lies above the midpoint of the company’s guided range.
Raytheon Technologies also continues to expect revenues in the range of $72.00-$73.00 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 still expects to generate free cash flow of $4.8 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
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 second quintile 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision 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.