Defense Conglomerate RTX Stock Soars - Q3 Earnings, Buyback, Business Sale And More

RTX Corporation RTX reported a third-quarter FY23 adjusted Net sales increased by 12% YoY to $18.95 billion, beating the consensus of $18.59 billion.

It clocked a GAAP sales decline of 21% year-over-year to $13.46 billion, reflecting the impact of the previously disclosed Pratt powder metal matter.

Adjusted EPS improved 3% Y/Y to $1.25, beating the consensus of $1.21.

At the end of the quarter, the backlog was $190 billion, of which $115 billion was from commercial aerospace and $75 billion was from defense.

RTX consolidated its business segments into Collins Aerospace, Pratt & Whitney, and Raytheon from 3Q23.

Collins Aerospace’s adjusted sales were $6.69 billion (+17% Y/Y) were driven by a 30% increase in commercial aftermarket, and a 27% increase in commercial OE. The adjusted operating margin expanded by 240 bps to 15.6%.

Pratt & Whitney’s adjusted sales were $6.33 billion (+18% Y/Y) and adjusted operating margin of 6.5%, up by 60 bps.

Raytheon’s adjusted sales increased by 3% Y/Y to $6.47 billion, and the adjusted operating margin contracted by 220 bps to 8.8%.

During the quarter, the company repurchased $1.4 billion of RTX shares.

Buyback: RTX board of directors approved a $10 billion accelerated share repurchase program commencing immediately.

RTX’s operating cash flow from continuing operations for the quarter totaled $3.32 billion, compared to $778 million in 3Q22. Free cash flow stood at $2.75 billion.

The company also announced a definitive agreement to sell its Cybersecurity, Intelligence and Services business within its Raytheon segment for ~$1.3 billion.

“The historic demand across our commercial aerospace and defense businesses drove 12 percent organic sales growth during the third quarter and led to another record backlog of $190 billion. We are on track to deliver on our updated financial commitments for 2023 including our increased sales and free cash flow outlook, as well as the tightened range for adjusted EPS* of $4.98 to $5.02 per share,” commented RTX Chairman and CEO Greg Hayes.

“We have made significant progress on our assessment of the Pratt & Whitney powder metal manufacturing matter and expect the financial impact to be in line with the previously disclosed charge,” stated Hayes.

FY23 Outlook: RTX expects sales of $74 billion (prior $73 billion-$74 billion), versus the consensus of $72.98 billion estimate; sees adjusted EPS of $ of $4.98 - $5.02 (prior $4.95 - $5.059), versus the consensus of $5.02.

The company expects a free cash flow of ~$4.8 billion, up from the prior ~$ 4.3 billion, and expects to share repurchase spend of ~$12.8 billion of RTX shares, up from $3.0 billion.

Price Action: RTX shares are trading higher by 6.71% at $78.04 on the last check Tuesday.

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