Raytheon: Travel Recovery Offsets Q4 Bad News In Defense & Tax
(Preview) Company Update (RTX US) (Buy)
Summary
RTX has gained another 3.5% since Q4 results on Tuesday, but still has a reasonable 20.7x P/E and 2.2% Dividend Yield.
Its aerospace segments continued a strong EBIT rebound, driven by the ongoing recovery in global air travel, which will also help 2023.
Its defense segments are suffering from both supply chain issues and execution problems; RTX is merging them to improve things.
The main bad news is the impact from new tax rules around R&D costs, which will reduce cashflows temporarily, including by $1bn in 2025.
With shares at $99.60, we expect an exit price of $133 and a total return of 44% (13.7% annualized) by 2025 year-end. Buy.
Introduction
Raytheon Technologies Corporation reported Q4 2022 results on Tuesday (January 25) morning. RTX shares have since risen by 3.5%, and are up 10.3% in the past year.
We initiated our Buy rating on Raytheon in May 2020, and RTX stock has since gained 62% (including dividends), including 45% from the end of 2020.
Q4 2022 results and the new 2023 …