Technology

Why Is Raytheon Technologies (RTX) Down 2.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Raytheon Technologies (RTX). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Raytheon Technologies due for a breakout? 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 drivers.

Raytheon Technologies Q3 Earnings Top, EPS View Up

Raytheon’s third-quarter 2021 adjusted earnings per share (EPS) of $1.26 outpaced the Zacks Consensus Estimate of $1.07 by 17.8%. Moreover, the bottom-line figure improved 125% from the year-ago quarter’s adjusted earnings of 56 cents.

Including one-time items, the company reported GAAP earnings of 93 cents compared with 10 cents per share recorded in the year-ago quarter.

The year-over-year improvement in the bottom line is attributable to higher year-over-year revenues as well as operating profit generated in the reported quarter.

Operational Performance

Raytheon Technologies’ third-quarter sales of $16,213 million missed the Zacks Consensus Estimate of $16,494 million by 1.7%. The sales figure, however, improved 9.9% from $14,747 million recorded in the year-ago quarter.

Total costs and expenses slipped 0.4% year over year to $14,994 million. The company generated an operating profit of $1,343 million compared with $434 million in the year-ago quarter.

Segmental Performance

Collins Aerospace: Sales at this segment improved 7% year over year to $4,592 million in third-quarter 2021 due to higher commercial aftermarket sales.

Its adjusted operating income came in at $480 million compared with the year-ago quarter’s level of $73 million.

Pratt & Whitney: Sales at this segment rose 35% year over year to $4,725 million, driven by growth in the commercial aftermarket, commercial OEM as well as military businesses.

Its adjusted operating profit was $189 million against the year-ago quarter’s operating loss of $43 million.

Raytheon Intelligence & Space: This segment recorded third-quarter sales of $3,740 million, almost flat year over year. Its operating profit was $391 million, up 12%.

Raytheon Missiles & Defense: This unit recorded sales of $3,902 million, up 5% year over year. The unit recorded $490 million of operating profit in the third quarter, up 9%.

Financial Update

Raytheon Technologies had cash and cash equivalents of $7,476 million as of Sep 30, 2021, compared with $8,802 million as of Dec 31, 2020.

Long-term debt was $30,768 million, as of Sep 30, 2021, down from $31,026 million as of Dec 31, 2020.

Net cash inflow from operating activities amounted to $1,932 million at the end of third-quarter 2021 compared with $1,622 million at the end of third-quarter 2020.

Its free cash flow was $2,801 million compared with $1,792 million at the end of third-quarter 2020.

Guidance

Raytheon Technologies raised the entire earnings guidance range for 2021 and tweaked revenue expectations.

The company currently projects adjusted EPS in the range of $4.10-$4.20, compared with the earlier guidance of $3.85-$4.00. The Zacks Consensus Estimate for EPS, pegged at $4.03, lies below the newly guided range.

The company currently expects to record revenues worth approximately $64.50 billion compared with its earlier projection of $64.4-$65.4 billion. The Zacks Consensus Estimate for revenues, pegged at $65.35 billion, is within the company’s new guidance.

The company currently expects to generate free cash flow worth approximately $5 billion compared with the earlier range of $4.5-$5 billion in 2021.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Raytheon Technologies has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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