RTX: “Powdered Metal” De-Risked Further & New $10bn Buyback

Company Update (RTX US) (Buy)

Highlights

• Analyses confirmed other engines will not see significant impact

• RTX will now buy back $10bn more shares this year

• Q3 was positive, with strong growth in commercial aerospace

• RTX’s market cap remains $27bn (19%) lower than on July 24

• With shares at $78.41, we see a 98% return (25.3% p.a.) by 2026

Introduction

RTX released Q3 2023 results on Tuesday (October 24); shares have risen 7.2% in the past two days, but remain 19% below what it was before July 25, when the “powdered metal” issue was first disclosed; its market capitalization is currently $27.1bn lower, disproportionate to the $3bn the issue is expected to cost (or any reasonable multiple thereof):

RTX Share Price (Last 1 Year)

Source: Google Finance (26-Oct-23).

The most important news was the completion of further analyses that confirmed the impact from “powdered metal” will be insignificant outside the plan on PW1100 engines announced last month. This gave RTX the confidence to launch a new $10bn accelerated buyback, funded …