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Why Is Raytheon Technologies (RTX) Up 7.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Raytheon Technologies (RTX). Shares have added about 7.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Raytheon Technologies due for a pullback? 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 catalysts.

Raytheon Technologies Q3 Earnings Beat, Sales View Down

Raytheon Technologies’ third-quarter 2022 adjusted earnings per share (EPS) of $1.21 beat the Zacks Consensus Estimate of $1.11 by 9%. However, the bottom-line figure dropped 4% from the year-ago quarter’s adjusted earnings of $1.26 due to the absence of a prior year tax benefit and lower pension income.

Including one-time items, the company reported GAAP earnings of 94 cents compared with 93 cents per share recorded in the year-ago quarter.

Operational Performance

Raytheon Technologies’ third-quarter sales of $16,951 million missed the Zacks Consensus Estimate of $17,003 million by 0.3%. The sales figure, however, rose 5% from $16,213 million recorded in the year-ago quarter.

Total costs and expenses increased 3.5% year over year to $15,517 million. The company generated an operating profit of $1,480 million compared with $1,343 million in the year-ago quarter.

Segmental Performance

Collins Aerospace: Sales at this segment improved 11% year over year to $5,100 million in third-quarter 2022, driven by higher commercial aftermarket as well as commercial OEM sales backed by recovering commercial air traffic and higher narrowbody deliveries.

Its adjusted operating income came in at $630 million compared with the year-ago quarter’s level of $480 million.

Pratt & Whitney: Sales at this segment rose 14% year over year to $5,380 million, driven by growth in the commercial aftermarket, military as well as commercial OEM businesses, backed by higher shop visits and related spare part sales as well as favorable OEM engine mix and volume.

Its adjusted operating profit was $318 million compared with the year-ago quarter’s operating profit of $189 million.

Raytheon Intelligence & Space: This segment recorded third-quarter sales of $3,626 million, down 3% year over year, driven by the divestiture of the Global Training and Services business.

Its operating profit was $371 million, marking a decline of 5%.

Raytheon Missiles & Defense: This unit recorded sales of $3,678 million, down 6% year over year. The unit recorded a $416 million adjusted operating profit in the third quarter, down 15%.

Financial Update

Raytheon Technologies had cash and cash equivalents of $5,381 million as of Sep 30, 2022, compared with $7,832 million as of Dec 31, 2021.

Long-term debt was $31,059 million as of Sep 30, 2022, down from $31,327 million as of Dec 31, 2021.

Net cash inflow from operating activities amounted to $2,540 million as of Sep 30, 2022 compared with $3,981 million at the end of third-quarter 2021.

Its free cash flow was $1,107 million at the end of third-quarter 2022 compared with $2,801 million at the end of third-quarter 2021.

Guidance

Raytheon Technologies updated its financial guidance for 2022.

The company currently projects adjusted EPS in the range of $4.70-$4.80 compared with the prior guidance range of $4.60-$4.80. The Zacks Consensus Estimate for Raytheon’s 2022 EPS, pegged at $4.65 lies below the company’s guided range.

The company now expects revenues in the range of $67.00-$67.30 compared with the prior range of $67.75-$68.75 billion. The Zacks Consensus Estimate for revenues, pegged at $66.84 billion, lies below the company’s guidance.

The company still expects to generate free cash flow worth approximately $6 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 7.83% due to these changes.

VGM Scores

Currently, Raytheon Technologies has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, 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 D. 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.

Performance of an Industry Player

Raytheon Technologies is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Hexcel (HXL), a stock from the same industry, has gained 13.5%. The company reported its results for the quarter ended September 2022 more than a month ago.

Hexcel reported revenues of $364.7 million in the last reported quarter, representing a year-over-year change of +9.3%. EPS of $0.33 for the same period compares with $0.13 a year ago.

Hexcel is expected to post earnings of $0.32 per share for the current quarter, representing a year-over-year change of +100%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.3%.

Hexcel has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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