Raytheon: Mixed Q3 Due To Supply Chain Issues, But Improving
(Preview) Company Update (RTX US) (Buy)
Summary
RTX shares have risen 7.1% since Q3 results two weeks ago, but are still attractive in our view, with a 20.3x P/E and a 2.3% Dividend Yield.
Q3 again saw strong EBIT growth in RTX's Aerospace segments, but supply chain headwinds caused declines in its Defense segments.
Management has reduced 2022 sales and EBIT outlook as a result, but still expects to see EBIT grow by 16.5% this year.
Things are improving sequentially and management is expecting both sales growth and margin expansion in 2023.
With shares at $96.14, we expect a total return of 49% (14.3% annualized) by 2025 year-end. Buy.
Introduction
Raytheon Technologies reported Q3 2022 results two weeks ago on October 25. Shares have since risen 7.1%, recovering all of their losses since late August, though still 9% below their peak in April.
We initiated our Buy rating on Raytheon in May 2020 and RTX stock has gained 56% since (including dividends); from the end of 2020, RTX stock has gained 40%, compared to a roughly flat S&P 50…