RTX beats Q3 estimates on Collins business strength, approves $10 billion share repurchase By Reuters

RTX beats Q3 estimates on Collins business strength, approves $10 billion share repurchase By Reuters

© Reuters. FILE PHOTO: Visitor passes the Raytheon Technologies Corporation (RTX) logo at the 54th International Paris Air Show at Le Bourget Airport near Paris, France, June 22, 2023. REUTERS/Benoit Tessier/File Photo

By Pratyush Thakur and Mike Stone

(Reuters) -RTX reported better-than-expected quarterly earnings on Tuesday, as a strong performance at its Collins Aerospace business offset the hit from a major quality crisis at engine making unit Pratt and Whitney.

The company also approved a $10 billion share repurchase program that will be funded through short and long-term debt.

Shares of the aerospace major were up 8.1% before the bell.

In July, RTX disclosed it had found microscopic contaminants in powdered metal, used to manufacture high-pressure turbine discs that are part of the engine’s core, the presence of which could lead to cracks in the engine.

RTX had at the time said 200 Geared Turbofan (GTF) engines would require “accelerated inspection” with 60 days to fix each engine with a contamination issue. However, two months later, it expanded the scope of inspections and said it would need to pull up to 700 engines off aircraft for lengthy quality inspections.

Chief Financial Officer Neil Mitchill told Reuters in an interview on Tuesday that the company planned to lay out the impact of the issue on other engine “models that are most significantly impacted by this – and what we are doing. And the conclusion will be that we do not see a significant incremental financial or operational impact.”

Pratt and Whitney, a subsidiary of RTX, booked a $2.48 billion operating loss in the reported quarter related to engine recalls and compensations to airlines.

But profit at RTX’s Collins Aerospace unit, which deals with commercial aftermarket service, rose 22% to $903 million.

RTX reported an overall third-quarter adjusted profit of $1.25 per share, beating Wall Street estimates of $1.21, according to LSEG data.

Adjusted revenue rose 12% to $18.95 billion, ahead of analysts expectations of $18.59 billion.

Despite the GTF-related losses, RTX raised its outlook for 2023, forecasting free cash flow of $4.8 billion compared with its previous prediction of $4.3 billion. The company now expects reported sales of $68.5 billion, up from about $67.5 billion, and adjusted sales of $74 billion, up from $73 billion. Adjusted earnings per share – previously projected to be $4.95 to $5.05 – are now expected to be between $4.98 and $5.02.

The Arlington, Virginia-based company also entered into an agreement to sell its Cybersecurity, Intelligence and Services business within its Raytheon (NYSE:) segment for around $1.3 billion.

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