2024-04-27 01:39:32 ET
Summary
- RTX beat Q1 estimates on top and bottom line, growing sales by 12% YoY to $19.3B with consolidated operating margins expanding 20bps to 11.5%.
- As aftermarket begins to normalize, I see an emerging shift towards the OE market, with quarterly sales surging 33% vs Q1 23 (+63% for Pratt & Whitney OE sales).
- YoY Backlog growth increased slightly vs Q4 23 at 12.2% for a record $202B, flat defense more than offset by strong growth in commercial backlog (+$7B vs Q4 23).
- Remain Overweight on shares with a YE24 price target of $124, derived via a 10% GTF-discounted 13.9x multiple on 25E EBITDA of $16.6B.
I began covering RTX (RTX) (back then still known as Raytheon Technologies) back in November when I assigned an Overweight. My thesis was largely based on the confluence of a heavily discounted valuation in light of the recent GTF issues and a promising portfolio benefitting from the current aerospace upcycle, especially driven by Collins' aftermarket strength. In January I commented on RTX's Q4 and FY23 earnings which reaffirming my conviction as the company demonstrated strong execution across all end markets and lack of further bad news on the GTF helped ease investor concerns. Since my initiation shares have performed very strongly, up ~28% versus ~12% gains for both the broader sector and the US market....
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RTX: Surging OE Offsets Continuing Aftermarket Normalization