RTX - Is Raytheon Technologies Stock a Good Value Post-Spinout?
Life couldn't have started out tougher for Raytheon Technologies (NYSE: RTX). The newly formed merger of space and defense company Raytheon with the aerospace businesses of United Technologies (Pratt & Whitney and Collins Aerospace) was supposed to come at a time of good growth in commercial aerospace, backed by solid growth from the defense businesses of Raytheon. Unfortunately, the spreading of the COVID-19 pandemic from China has significantly impacted those assumptions. Let's take a look at whether the stock is still attractive for investors.
The major impact of COVID-19 on Raytheon Technologies, or RTX, is going to fall on its commercial aviation businesses. Specifically, engine orders and aftermarket parts at Pratt & Whitney, and original equipment manufacturer (OEM) and aftermarket parts at Collins Aerospace. If airlines are under severe financial pressure from travel bans, then orders at Boeing and Airbus are likely to get cancelled/deferred. In addition, fewer flights mean a drop in demand for aftermarket parts.
Raytheon Technologies is relying on revenue from missile systems to offset weakness elsewhere.