Shares of aerospace and defense major RTX Corp. (NYSE:RTX) are trending lower today after its better-than-anticipated second-quarter numbers were overshadowed by the disclosure of a defect in Pratt & Whitney engines.
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In Q2, revenue rose 12.3% year-over-year to $18.32 billion, outperforming estimates by $620 million. EPS at $1.29 too came in ahead of expectations by $0.11. Total order backlog stood at $185 billion with robust double-digit sales growth across Collins Aerospace, Pratt & Whitney, and Raytheon Missiles & Defense segments.
Further, buoyed by this performance and healthy demand, the company has also upped its expectations for the full year 2023. Sales are now anticipated between $73 billion and $74 billion versus earlier estimates between $72 billion and $73 billion. EPS for the year is seen landing between $4.95 and $5.05 as compared to the prior outlook between $4.90 and $5.05. Additionally, the company has also announced share buybacks worth $3 billion for the year.
Despite this healthy performance, investor sentiment in the stock is taking a beating after RTX lowered its free cash flow expectations ($4.3 billion from the previous $4.8 billion) owing to a defect that will necessitate the removal of certain Pratt & Whitney engines from service for inspection.
While the defect does not impact engines under production, a substantial part of the PW1100G-JM fleet will undergo removals and inspection over the next 9 to 12 months.
Overall, the Street has a $110.03 consensus price target on RTX alongside a Moderate Buy consensus rating.
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