Raytheon: Solid Q1 Results Despite Temporary Headwinds; Buy

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

Summary

• RTX delivered solid Q1 results in April, with EBIT up 18.8% year-on-year, but shares have fallen back 13% from their recent peak.

• RTX's Commercial Aftermarket sales have continued to recover, though military sales are down partly due to production delays.

• Near-term headwinds include supply chain issues, cost inflation, the exit from Russia, and COVID lockdowns in China - all are temporary.

• RTX reaffirmed its full-year outlook for EPS and Free Cash Flow, raised its dividend by 8%, and has continued to repurchase shares.

• With shares at $91.92, we expect a total return of 55% (13.6% annualized) by 2025 year-end. The Dividend Yield is 2.4%. Buy.

Introduction

We review our investment case on Raytheon. Q1 results were released on April 26.

We initiated our Buy rating on Raytheon in May 2020. Shares have since gained 48% (with dividends), including 32% since 2020 year-end, though they have fallen back 13% since their early-April peak.

Q1 results support our investment case, with commercial ae…