Raytheon Technologies (RTX) Up 2.3% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Raytheon Technologies (RTX). Shares have added about 2.3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Raytheon Technologies Q2 Earnings Beat, Sales Fall Y/Y

Raytheon Technologies second-quarter 2020 adjusted earnings per share (EPS) of 40 cents outpaced the Zacks Consensus Estimate of 10 cents by 300%.

However, the bottom-line figure declined 67.7% from the year-ago quarter’s $1.24.

Including one-time items, the company reported loss of $2.56 against earnings of $1.37 per share in the year-ago quarter.

The year-over-year deterioration in bottom line is attributable to charges related to the current economic environment primarily attributable to the COVID-19 pandemic.

Operational Performance

Raytheon Technologies’ first-quarter sales of $14,061 million declined 24.1% on a year-over-year basis. The top line, however, beat the Zacks Consensus Estimate of $13,983 million by 0.6%.

Total costs and expenses increased 46.3% year over year to $14,720 million. The company incurred operating loss of $3,760 millionagainst operating income of $1,386 million in the year-ago quarter.

Segmental Performance

Collins Aerospace: Adjusted sales at this segment declined 35% year over year to $4,298 million in second-quarter 2020 due to commercial sales decline attributable to lower in-flight hours, aircraft fleet utilization and commercial OEM deliveries. Its adjusted operating income came in at $24 million compared with the year-ago quarter’s level of $1,293 million.

Pratt & Whitney: Adjusted sales at this segment declined 30% year over year to $3,607 million due to a significant reduction in shop visits and related spare part sales as well as lower commercial engine deliveries. Its adjusted operating loss was $151million against the year-ago quarter’s operating income of $452 million.

Raytheon Intelligence & Space: This segment recorded second-quarter adjusted sales of $3,314 million and recorded $311 million of adjusted operating profit in the quarter.

Raytheon Missiles & Defense: This unit recorded second-quarter adjusted sales of $3,590 million and $397 million of adjusted operating profit in the quarter.

Financial Update

Raytheon Technologies ended Jun 30, 2020 with cash and cash equivalents of $6,975 million, up from $4,937 million as of Dec 31, 2019.

Long-term debt was $31,210 million, as of Jun 30, 2020, down from $37,701 million as of Dec 31, 2019.

Net cash inflow from operating activities amounted to $1,342 million at the end of second-quarter 2020 compared with $2,769 million in the year-ago period.

Its free cash flow came in at $559 million compared with $2,091 million at the end of second-quarter 2019.


How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 38.33% due to these changes.

VGM Scores

At this time, Raytheon Technologies has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly 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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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