By Investors are eagerly awaiting the fourth-quarter results of aerospace-and-defense giant RTX, following a volatile 2023. Amid the anticipation, they are optimistic about a solid 2024 outlook, free from any new engine issues.
Fourth Quarter Projections
According to FactSet, Wall Street analysts project earnings per share of $1.24 on sales of $19.7 billion for the quarter. Comparatively, in the same period last year, RTX recorded earnings per share of $1.27 on sales of $18.1 billion.
Full Year Projections
For the full year, Wall Street anticipates earnings per share of $5. In January 2023, RTX management had initially guided for earnings per share of approximately $4.98, but this figure gradually increased to a midpoint of $5 per share by October.
High Hopes for 2024
Looking ahead to 2024, analysts expect RTX to achieve earnings per share of $5.28, accompanied by robust free cash flow amounting to $5.2 billion on sales totaling $79.3 billion. In a preview report, J.P. Morgan analyst Seth Seifman describes these projections as “realistic” and predicts that the company’s guidance will closely align with them. Seifman rates RTX shares as a Buy, setting a price target of $89.
Assessing the Geared Turbofan Engine
In addition to the outlook for 2024, investors will also be seeking an update on RTX subsidiary Pratt & Whitney’s geared turbofan (GTF) engine. Recent challenges in materials science have resulted in suboptimal engine reliability, leading to an estimated expenditure of $6 billion to $7 billion for rectification.
As expectations run high, all eyes are on RTX as they prepare to divulge their quarterly results and provide insights into what lies ahead for the company.
Engine Troubles Continue to Weigh on RTX Stock
“We don’t see RTX changing its targets for the GTF recall this quarter,” wrote Vertical Research Partners analyst Rob Stallard in a preview report. Despite some progress, there is still a long way to go in fixing the engine issues.
According to Bloomberg, approximately 33% of analysts covering RTX stock have Buy ratings, with an average price target of about $92. This falls short of the average Buy-rating ratio for stocks in the S&P 500, which is around 55%.
These ongoing GTF problems have had a negative impact on investor sentiment. Over the past 12 months, RTX stock has declined by about 9%, while the S&P 500 and Nasdaq Composite have experienced gains of approximately 22% and 38% respectively.
Looking towards the future, options markets suggest that there may be a potential 4% movement, either up or down, following the upcoming earnings. Historically, shares have moved an average of about 6%, up or down, during the past four quarterly reports, with two increases and two decreases over that period.
The company’s management will be hosting a conference call at 8:30 a.m. Eastern time to discuss the latest results and address any concerns.
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