Key Points
RTX beat expectations but lowered full-year guidance due to tariffs.
The company had telegraphed the tariff effect, and RTX’s long-term bull case remains in place.
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Aerospace conglomerate RTX (NYSE: RTX) beat quarterly expectations but warned today that tariffs and taxes will take their toll in the quarters to come. The stock is under pressure on Tuesday and is down 2% as of 12:30 ET.
Image source: RTX.
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Strong commercial sales
RTX was formed from the merger of defense-focused Raytheon and the largely commercial aerospace business of United Technologies. It earned $1.56 per share in the second quarter on revenue of $21.6 billion, topping Wall Street’s consensus estimate for $1.43 per share on $20.6 billion in sales. Revenue was up 9% year over year, driven by strong double-digit growth on the commercial side.
RTX and other commercial aerospace companies are benefiting from issues getting new planes to market, which has boosted demand for spare parts. The company’s Pratt & Whitney aircraft engine business grew sales by 19% in the quarter, while its defense business was up 6%.
The only issue was guidance. Management hiked its full-year sales guidance by nearly $2 billion to a range of $84.75 billion to $85.5 billion, above the $84.3 billion consensus. But guidance for earnings per share was reduced to a range of $5.80 to $5.95, from $6 to $6.15, on tariff impact and tax estimate revisions.
Is RTX stock a buy?
The new earnings guidance should not have come as a surprise. In its previous estimate, RTX had warned of upward of a $0.50 per share effect from tariffs. The new guidance is an attempt to be more precise, baking the impact into the forecast.
Pratt & Whitney is a formidable franchise, and with a commercial-plane backlog stretching to near the end of the decade, there is a lot of potential for sales growth from here. Investors shouldn’t dwell on the guidance revision when considering RTX stock.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends RTX. The Motley Fool has a disclosure policy.
