Raytheon Technologies Corp. Faces Challenges as Stock Drops

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Raytheon Technologies Corp.’s stock (RTX, +0.64%) experienced a 3.6% decrease in premarket trade on Tuesday. This drop follows the company’s second-quarter performance, where it managed to surpass consensus estimates. However, an unexpected issue surfaced, leading to a revision of its full-year free cash flow guidance. Raytheon has identified a rare condition in the powder metal used to create specific engine parts in Pratt & Whitney engines, necessitating an accelerated fleet inspection.

Revised Projections and Earnings Report

Raytheon reported net income of $1.327 billion, or 90 cents per share, for the quarter, showcasing growth from $1.304 billion, or 88 cents per share, during the corresponding period last year. Adjusted per-share earnings came to $1.29, surpassing the $1.18 FactSet consensus. Sales for the quarter stood at $18.315 billion, indicating an increase from $16.314 billion last year. This figure also surpassed the $17.683 billion FactSet consensus.

Impact on Full-Year Outlook

Despite positive quarterly results, Raytheon adjusted its full-year expectations due to the aforementioned engine issue. The company now anticipates a cash flow of approximately $4.3 billion, down from the previous projection of about $4.8 billion. Adjusted EPS is now estimated to range between $4.95 and $5.05, compared to the previous guidance of $4.90 to $5.05. Additionally, sales are expected to fall within the range of $73.0 billion to $74.0 billion, up from the initial range of $72.0 billion to $73.0 billion.

Stock Performance and Conclusion

In the year-to-date period, Raytheon’s stock has fallen by 3.9%. In contrast, the S&P 500 (SPX, +0.40%) has experienced an 18.6% increase. Raytheon Technologies Corp. acknowledges the challenges posed by the need for early engine inspections but reassures stakeholders that engines currently in production remain unaffected by the issue.

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