It’s a disaster afoot for aerospace stock RTX Corporation (NYSE:RTX), as it fends off not only downgrades from analysts but the larger reason behind that downgrade as well. RTX Corporation is down over 3% in Tuesday afternoon’s trading session, and the damage may not yet be done. The problem started with RTX’s Pratt & Whitney engine line, where some serious problems were discovered. Sufficiently serious, in fact, to require about $7 billion dollars to not only fix all the problems but also offer concessions to airlines for the lost time they endured thanks to the malfunctioning engines.
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That was bad enough for Barclays analyst David Strauss to lower RTX from “overweight” to “equal weight.” Meanwhile, Ken Herbert at RBC Capital also downgraded the stock, going from “outperform” to “sector perform.”
Both Strauss and Herbert cited the Pratt & Whitney failures—and the costs involved with making the matter right—as primary reasons for the cuts, particularly in terms of what both would do to RTX’s overall cash flow. Reports note that it could take most of a year—about 300 days—to clear the backlog of repairs this will cause. The trouble with the engines traces back to “contaminated metal” parts that are more prone to cracking. That’s particularly true in hotter climates, and considering how much air travel goes to hotter climates, it’s a very serious issue.
Most analysts, however, aren’t counting RTX Corporation out yet. RTX stock currently has a Moderate Buy consensus rating, thanks to seven Buy ratings and eight Holds. Further, with an average price target of $96.92, RTX stock also boasts 30.08% upside potential.
