Raytheon: Shares Weak Since Q2 Results, But On The Right Track

(Preview) Company Update (RTX US) (Buy)

Summary

• RTX shares have been weak since April, fell another 4.6% when Q2 results were released, and have only partially recovered since.

• Q2 results showed how supply chain issues are negatively affecting RTX's defense businesses, leading to lower sales and margin declines.

• RTX's aerospace businesses continue to benefit from the strong rebound in commercial travel, more than offsetting the weakness in defense.

• Group sales and EBIT both grew year-on-year, full-year 2022 outlook was reiterated, and RTX is on track for its medium-term targets.

• With shares at $91.78, we expect an exit price of $128 and a total return of 54% (14.5% annualized) by 2025 year-end. Buy.

Introduction

Raytheon shares have been weak since peaking in April, and fell another 4.6% on July 26 when Q2 2022 results were released, though they have rebounded by 1.7% since.

We initiated our Buy rating on RTX in May 2020. Since then, shares have gained 49% (with dividends), including 33% since 2020 year-end, though they have fallen…