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Recovering Air Travel to Aid Raytheon (RTX) Q2 Earnings

Zacks Equity Research
·4-min read

Raytheon Technologies Corp. RTX is set to release second-quarter 2022 results on Jul 26, before market open.

Raytheon delivered an earnings surprise of 12.63% in the last four quarters, on average. A continued recovery in air travel is likely to benefit Q2 results, amid lower F-35 sales and supply chain constraints.

Pratt & Whitney and Collins: Key Growth Catalyst

The merger between legacy missile-maker Raytheon Company with multinational conglomerate United Technologies, resulting in the formation of Raytheon Technologies, was completed in April 2021. Consequently, Raytheon Technologies’ second-quarter 2022 results are expected to benefit from the incremental merger synergies.

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Also, cost synergies from the acquisition of Rockwell Collins are anticipated to bolster the company’s soon-to-be-reported quarter’s results.

Raytheon Technologies Corporation Price and EPS Surprise

Raytheon Technologies Corporation Price and EPS Surprise
Raytheon Technologies Corporation Price and EPS Surprise

Raytheon Technologies Corporation price-eps-surprise | Raytheon Technologies Corporation Quote

The continued recovery of domestic and short-haul international air travel are projected to have once again boosted the company’s overall commercial OEM as well as aftermarket sales in the second quarter. This must have been the key catalyst behind sales growth expectation for both its Pratt & Whitney as well as Collins business units, along with solid acquisition synergies.

However, headwinds related to the delivery of original equipment for 787 jets might have partially impacted the performance of these two units in the soon-to-be-reported quarter

The Zacks Consensus Estimate for Collins Aerospace segment Q2 revenues is pegged at $5,038 million, implying an improvement of 10.8% from the 2021 second-quarter figure. The estimate for Pratt & Whitney indicates an increase of 9%.

Missiles & Defense: Bleak Outlook

Although growing global budgets have led Raytheon to witness solid order growth in the recent past, lower volume for F-35 jets might have dragged down its military sales.

The Zacks Consensus Estimate for Missiles & Defense segment Q2 revenues is pegged at $3,909 million, suggesting a decline of 1.9% from the 2021 second-quarter figure.

Other Factors to Note

Amid the ongoing conflict between Russia and Ukraine, RTX has ceased its business activities with Russia, which in turn might hurt Q2 sales. Also, constant supply chain pressure across its business might have had an adverse impact on its overall bottom-line performance.

Nevertheless, Raytheon’s relentless cost-reduction initiatives along with strong operational performance are expected to have benefited its second-quarter earnings.

Q2 Expectations

The Zacks Consensus Estimate for Raytheon Technologies’ second-quarter earnings is pegged at $1.13 on revenues of $16.37 billion, indicating a 9.7% and 3.1% improvement from the respective year-ago quarter’s reported numbers.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Raytheon Technologies this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. This is not the case here.

Earnings ESP: Raytheon Technologies has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks to Consider

Below are three defense stocks that contain the right combination for an earnings beat:

L3Harris Technologies LHX: It is scheduled to release its second-quarter results on Jul 28. LHX holds a Zacks Rank #3 and an Earnings ESP of +1.09%. You can see the complete list of today’s Zacks #1 Rank stocks here.

LHX delivered a four-quarter average earnings surprise of 2.32%. The Zacks Consensus Estimate for L3Harris’ second-quarter earnings, pegged at $3.16, has moved up 0.3% over the past seven days.

Triumph Group TGI: It is scheduled to release its first-quarter fiscal 2023 results on Aug 3. TGI holds a Zacks Rank #3 and an Earnings ESP of +53.33%.

The Zacks Consensus Estimate for Triumph Group’s fiscal first-quarter earnings, pegged at 8 cents, has improved 33.3% over the past 30 days. TGI delivered a four-quarter average earnings surprise of 42%.

CAE Inc CAE: The company is expected to release its fiscal first-quarter results soon. It holds a Zacks Rank #3.

The Zacks Consensus Estimate for CAE’s fiscal first-quarter earnings, pegged at 18 cents, has remained unchanged over the past seven days. CAE delivered a four-quarter average earnings surprise of 7.67%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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