RTX Shares Sink as the Defense Contractor Deals with a Defective Engine Part

RTX Corporation (RTX) was the worst-performing stock in the S&P 500 on Tuesday after the former Raytheon Technologies warned a defective jet engine part will require an “accelerated fleet inspection.”

The defense contractor indicated that its Pratt & Whitney division discovered a “rare condition in powder metal” used to make some engine parts. It added the problem doesn’t affect engines already in use. 

RTX explained that it anticipates that because of the issue, a “significant portion” of the PW1100G-JM engine fleet will need accelerated removals and inspections within the next nine to 12 months, including about 200 accelerated removals by mid-September. The engine powers the Airbus A320neo.

The company noted that it’s taking steps to minimize the operational impacts and is working to support its customers.

CEO Greg Hayes said the problem has led RTX to cut its 2023 free cash flow estimate by half a billion dollars to $4.3 billion. 

The news sent shares tumbling to a nine-month low, even as RTX reported better-than-expected second quarter results. Earnings per share (EPS) came in at $1.29, and sales jumped 12% to $18.23 billion. Both were more than analysts’ forecasts. 

The company also boosted the low end of its full-year EPS guidance to $4.95 to $5.05 from $4.90 to $5.05, and revenue to a range of $73 billion to $74 billion, up from $72 billion to $73 billion.