RTX - Raytheon CEO: Supply chain issues and labor shortages could last into 2024

Raytheon Technologies CEO Greg Hayes said Monday that he doesn't expect manufacturing conditions, which have been undermined recently by supply chain snarls and labor shortages, to begin to approach normal until at least the end of next year.

"I think we're not going to see the end of the supply chain and the people challenges this year. I think it's the end of 2023 and going into 2024," the head of the airplane maker and defense contractor Raytheon ( NYSE: RTX ) told CNBC.

Hayes noted that "demand is out there" for the firm's airplanes but that a "really difficult" manufacturing environment keeps the company from fulfilling all the potential business available. The Raytheon CEO said that the labor shortage had the biggest impact on its ability to meet demand.

"It is direct labor, it is skilled labor, that is the hardest thing to get right now," he said. "There's a lot of things we can't get done because we can't get the people."

Looking at the firm's defense business, Hayes said Russia's invasion of Ukraine changed the geopolitical landscape.

"What's happened in Ukraine has been awful from a humanitarian standpoint, from a geopolitical standpoint. And it has changed the dynamic of the defense industry completely," he said.

On inflation and interest rates, the Raytheon CEO argued that "we have to do something to slow down the economy" in order to get price increases under control. As a result, he predicted that the Federal Reserve will have to increase the central bank's key rate above at least 2.5%.

RTX has seen mild gains in 2022, while the overall market has lost significant ground. The stock has climbed almost 5% year to date, while the S&P 500 has dropped nearly 19%

This has been part of a general rally in defense stocks. Peers like Lockheed Martin ( LMT ), Northrop Grumman ( NOC ) and General Dynamics ( GD ) have all shown gains as well. NOC has climbed nearly 20%, while LMT has advanced about 12%. GD has ticked up around 3%.

On the other side of the spectrum, fellow airplane maker Boeing ( BA ) has dropped about 29% in 2022.

For more on RTX's longer-term outlook, see a deep dive from Seeking Alpha's The Value Pendulum, who looks at where the stock will be by 2025 .

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