Improved sales of equipment led to a 3% jump in revenue for this company during the most-recent quarter.
Meanwhile, a recent merger has offset about $1.1 billion in annual costs.
The stock trades at 20.2 times the company’s 2022 earnings forecast.
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RAYTHEON TECHNOLOGIES CORP. (New York symbol RTX; www.rtx.com) is a leading maker of commercial aircraft equipment, electronic systems for military aircraft and radar systems, and guided missiles.
The company took its current form on April 3, 2020, with the all-stock merger of United Technologies Corp. and Raytheon Co. It also spun off its Otis (elevator) and Carrier (heating and air conditioning equipment) businesses as separate firms.
Raytheon is now raising its quarterly dividend by 7.8% with the June 2022 payment. Investors will then receive $0.55 a share instead of $0.51. The new annual rate of $2.20 yields 2.3%.
The company’s stock has gained over 50% since its April 2020 merger. This is partially due to the ongoing Russian invasion of Ukraine.
More specifically, Ukraine is asking for 500 Stinger and Javelin missiles per day to use against the Russians. Raytheon makes the Stinger and partners with Lockheed Martin (New York symbol LMT) to make the Javelin.
The company’s sales rose 24.8%, from $45.35 billion in 2019 to $56.59 billion in 2020. Stronger demand for military products offset lower sales at both its Collins Aerospace and Pratt & Whitney businesses due to COVID-19. Sales rose a further 13.8% to $64.39 billion in 2021.
Overall earnings, excluding one-time items, declined 14.3%, from $4.28 billion in 2019 to $3.71 billion in 2020. Due to more shares outstanding as a result of the merger, per-share earnings fell at a faster rate of 44.8%, from $4.95 to $2.73. In 2021, earnings increased 73.9% to $6.45 billion, while per-share earnings gained 56.4% to $4.27.
The company’s revenue in the quarter ended March 31, 2022, rose 3.0%, to $15.72 billion from $15.25 billion a year earlier. If you adjust for businesses that Raytheon recently sold, sales improved 4%. Improving demand for jet engines and other aircraft components from commercial aircraft makers offset lower sales of defence-related equipment.
Excluding costs related to the merger and other unusual items, Raytheon earned $1.72 billion in the quarter. That’s up 25.8% from $1.37 billion. Due to fewer shares outstanding, earnings per share gained 27.8%, to $1.15 from $0.90.
The company ended the quarter with cash of $6.04 billion. Its long-term debt of $31.3 billion is just 22% of its market cap.
So far, the merger has cut about $1.1 billion in annual costs. Raytheon anticipates annual savings of $1.5 billion by the end of the first quarter of 2024.
The company expects to earn between $4.60 and $4.80 a share for all of 2022. The stock trades 20.2 times the midpoint of that range. That’s a reasonable p/e, particularly as demand for jet engines from commercial aircraft makers is rising on a rebound in air travel volumes.
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