RTX - Embedded Expectations Analysis - 2021 10 01
Raytheon Technologies Corporation (RTX:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 17.1x Uniform P/E. Even at these levels, the market is pricing expectations for profitability to stabilize, but management may have concerns about free cash flow generation, segment margins, and their innovation capabilities.Specifically, management may lack confidence in their ability to maintain free cash flow generation, continue exceeding adjusted EPS expectations, and further improve productivity and inventory turns across the business. In addition, they may have concerns about their E&D investment strategy, potential disruptions to F-135 engine deliveries, and the pace of commercial air traffic recovery. Furthermore, management may lack confidence in their ability to maintain margins in the Raytheon Missiles & Defense (RMD) and Raytheon Intelligence & Space (RIS) segments, sustain RIS segment adjusted sales and operating profit growth, and meet RMD segment operating profit guidance. Moreover, they may be overstating their capacity to develop the technologies of the next conflict, and they may be concerned about the sustainability of shop visit growth for the Pratt & Whitney business. Finally, management may lack confidence in their ability to sustain procurement and supply chain savings, ramp OE production for Boeing, and partner with more countries for their Patriot franchise.
Raytheon Technologies is an aerospace and defense company providing systems and services for commercial, military and government customers. Collins Aerospace Systems specializes in aerostructures, avionics, interiors, mechanical systems, mission systems and power controls that serve customers across the commercial, regional, business aviation and military sectors. Pratt & Whitney designs, manufactures and services aircraft engines and auxiliary power systems for commercial, military and business aircraft. Raytheon Intelligence & Space develops sensors, training, and cyber and software solutions. Raytheon Missiles & Defense provides end-to-end solutions to detect, track and engage threats.
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