The combination of record defense backlogs, strong international demand, and improving aerospace performance positions RTX Corp. for substantial growth. The defense segment’s $90 billion backlog demonstrates exceptional momentum in one of its core operations.
Meanwhile the commercial aerospace division benefits from robust aftermarket demand and increasing global air travel. The company appears well-positioned for continued success while the stock trades at 20.9 times the company’s earnings forecast.
RTX CORP. (New York symbol RTX) changed its name from Raytheon Technologies Corp. to RTX (it did not change the trading symbol) in July 2023. Today, RTX, formed from the 2020 merger of Raytheon and United Technologies, is a leading maker of commercial aircraft equipment, electronic systems for military aircraft, and guided missiles.
RTX has three business units: Collins Aerospace makes aircraft control systems, navigation equipment and cabin interiors (34% revenue in the latest quarter, 63% of earnings); Pratt & Whitney makes jet engines (34%, 30%); and Raytheon makes a variety of military equipment, such as land and sea-based missile defence and radar systems (32%, 7%). The U.S. government is the company’s biggest customer, accounting for about 55% of its revenue.
RTX has now agreed to pay $959 million to settle several lawsuits related to Raytheon before the 2020 merger. Those include charges that it defrauded the U.S. Department of Defense into overpaying for certain equipment, and that it bribed an official in Qatar to secure orders from that country’s air force.
However, the company is now strengthening its oversight procedures, so the scandal will likely have little impact on RTX’s ability to secure new defence contracts.
Growth Stocks: RTX’s revenue rockets and earnings rise on higher airline demand
Meanwhile, RTX’s revenue in the third quarter of 2024 rose 49.2%, to $20.1 billion from $13.46 billion a year earlier. That beat the consensus forecast of $19.91 billion. If you adjust for the recent sale of its Cybersecurity, Intelligence and Services business for $1.3 billion, organic revenue rose 8.0% in the quarter.
The higher revenues are mainly due to stronger demand from airlines for spare parts. Sales of military equipment also improved.
The company has a record backlog of $221 billion, including $131 billion of commercial and $90 billion of defense.
If you exclude unusual items, mainly charges related to lawsuit settlements, overall earnings gained 6.9%, to $1.95 billion from $1.82 billion. Due to fewer shares outstanding, per-share earnings rose 16.0%, to $1.45 from $1.25. That also beat the $1.34 consensus estimate.
The company’s earnings for all of 2024 will probably rise 8% to $5.54 a share and the stock trades at a reasonable 20.9 times that estimate.
With the June 2024 payment, RTX raised your quarterly dividend by 6.8%, to $0.63 a share from $0.59. The new annual rate of $2.52 yields 2.2%.
The company’s TSI Dividend Sustainability Rating is Above Average with the company having maintained payments for an impressive 54 consecutive years.
Recommendation in Wall Street Stock Forecaster: RTX Corp. is a buy.
