RTX Surpasses Expectations with Strong Q4 Earnings Fueled by Aerospace Recovery

In early New York trading, RTX shares surged by 6.5%, reflecting the positive financial results.

RTX (RTX.N) announced impressive fourth-quarter earnings driven by a resurgence in commercial air traffic and heightened global defense spending.

The company’s aftermarket service and defense business segments experienced significant margin growth, surpassing market expectations.

In early New York trading, RTX shares surged by 6.5%, reflecting the positive financial results.

The company also provided a promising outlook for 2024, with projected profits ranging from $5.25 to $5.40 per adjusted share, closely aligning with analysts’ estimates of $5.28 per share, according to LSEG data.

RTX’s aftermarket business thrived as airlines extended the use of their aircraft to meet increased travel demand and cope with a shortage of new jets.

A standout contributor was Pratt and Whitney, an RTX subsidiary, which reported a remarkable 25% increase in operating profit during the quarter.

This growth was partly attributed to an ongoing inspection campaign aimed at identifying potentially flawed components in its geared turbofan jet engines.

The issue stemmed from the use of a powder metal in engine parts, such as high-pressure turbine disks and high-pressure compressor disks, which had the potential to develop micro-cracks and fatigue.

Chief Financial Officer Neil Mitchill indicated that negotiations with customers regarding the GTF issue were progressing positively and aligned with the company’s financial and operational assumptions.

RTX maintained its earlier guidance, with approximately 350 aircraft expected to be grounded at any given time due to engine removals.

However, peak groundings in early 2024 were projected to be lower than the initial estimate of 650 aircraft, thanks to various initiatives, including collaboration with GTF maintenance providers to reduce repair times.

RTX’s defense arm, Raytheon, under the leadership of retiring Wes Kremer, reported a notable 14% increase in operating profit.

This growth was attributed to the demand for key defense systems like AMRAAM rockets and Patriot systems, which were instrumental in Ukraine’s defense against Russia’s invasion.

The broader U.S. defense industry is experiencing increased demand due to factors such as the Russia-Ukraine conflict, support for Middle Eastern allies, and concerns about Chinese aggression.

These developments have led to a rise in contracts for companies like RTX, Lockheed (LMT.N), General Dynamics (GD.N), and Northrop Grumman (NOC.N), following the passage of the $886 billion U.S. defense policy bill.

In terms of financial performance, RTX exceeded expectations, reporting an adjusted net income of $1.29 per share for the fourth quarter, ahead of analysts’ estimates of $1.24 per share.

The company’s sales also exceeded Street expectations, coming in at $19.93 billion compared to the anticipated $19.7 billion, according to LSEG data.

However, RTX forecasted 2024 revenue slightly below expectations, citing ongoing supply challenges in the global aerospace industry, with revenue expectations ranging between $78 billion and $79 billion, compared to analysts’ average projection of $79.67 billion.