RTX Stock Trades In Buy Zone After Cruising Past Earnings Forecasts, Reaffirming Outlook

RTX stock advanced in a buy zone early Tuesday after defense giant Raytheon (RTX) topped Q1 earnings forecasts and reaffirmed its full year outlook.

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Raytheon Earnings

Results: Raytheon adjusted earnings rose 6% to $1.22 per share on a 10% jump in revenue, to $17.2 billion.

Expectations: Analysts polled by FactSet expected adjusted earnings to dip 1.7% to $1.13 per share on 7.9% revenue growth to $16.96 billion.

Raytheon reported free cash outflows of $1.383 billion for the quarter, owing partly by $520 million in capital expenditures. Last year, Raytheon recorded positive free cash flow of $37 million, which included $439 million in capital expenditures.

The company’s backlog rose to $180 billion for the quarter, $109 billion of which was from commercial aerospace and $71 billion from its defense business. In Q1 2022 the backlog stood at $154 billion.

Raytheon’s Collins Aerospace sales jumped 16% to $5.58 billion while Pratt & Whitney sales surged 15% to $5.23 billion. Raytheon Intelligence & Space revenue inched lower to $3.57 billion. Revenue from the Missiles & Defense business rose 4% to $3.67 billion.

Outlook: Raytheon reaffirmed its full year 2023 outlook and forecasts adjusted earnings between $4.90 and $5.05 on $72 billion to $73 billion in sales. FactSet projections are in the upper end of that range at earnings of $5.01 per share on revenue of $72.38 billion. For 2022, Raytheon reported earnings of $4.78 per share on $67 billion in sales.

RTX Stock

RTX stock is trading in the buy zone above a flat base after surpassing the 101.03 buy point on Feb. 17. The current buy zone, which extends 5% beyond the buy point, stretches to 106.08.

RTX stock eased 0.7%  to 101.80 after Tuesday’s opening bell. Shares climbed 1.9% to 104.40 premarket following results. The early move pushed Raytheon stock just below its 10-day moving average but it is still trading above its 50-day moving average and 10-week lines.

LMT Earnings

Last Thursday, Lockheed Martin (LMT) reported adjusted earnings at $6.43 per share. The numbered were flat, year over year, but enough to clear Wall Street expectations of a 6% decline. LMT stock broke out following results.

Meanwhile, China blacklisted Raytheon and Lockheed Martin  in February in retaliation for weapons sales to Taiwan.

Jefferies downgraded Raytheon to hold from buy on Thursday prior to earnings and cut its price target on RTX stock to 110 from 115. Raytheon’s Collins Aerospace business is “well appreciated and rather solid,” analyst Sheila Kahyaoglu wrote in a research note. The biggest questions surround Raytheon’s Missiles & Defense division and its Pratt & Whitney aerospace engine segment.

For Defense, Jefferies sees a lack of visibility for growth drivers as acceleration is already baked into estimates. Meanwhile, Jefferies expects near-term profit headwinds for Pratt & Whitney. The firm also forecasts free cash flow to stand at $7.1 billion in 2025 while Raytheon projects a target of $9 billion.

You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison

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