On Tuesday, Deutsche Bank adjusted its price target on shares of RTX Corp. (NYSE: RTX), increasing it to $131.00 from the previous $129.00, while maintaining a Hold rating on the stock. The adjustment follows RTX Corp.'s recent financial performance, which showed significant operational improvements in certain divisions, although there were setbacks in others.
The analyst from Deutsche Bank acknowledged that while RTX Corp.’s results from Collins were disappointing due to a miss and a guide-down, the issues were not unexpected. The pressures on original equipment (OE) rates and the associated risks had been widely recognized. Despite this, the analyst suggested that Collins' current challenges might position RTX Corp. for stronger OE growth relative to its peers as it enters 2025.
The analyst also noted that RTX Corp.'s Pratt & Whitney (P&W) and Raytheon (NYSE:RTN) divisions exhibited continued improved operating performance, which contributed to the company's solid overall results. Moreover, there is a growing case for earnings before interest and taxes (EBIT) upside at Raytheon, especially as the company progresses towards 2026. This potential is supported by improvements in solid rocket motor production rates and the significant $90 billion defense backlog RTX is working through, 44% of which now comes from international contracts.
Additionally, RTX Corp. has secured a critical license during the third quarter that is essential for resuming work under certain contracts with a Middle Eastern client. The Deutsche Bank analyst believes that this client is likely Saudi Arabia, a partnership that could lead to further revenue and bookings for RTX Corp. at higher margins.
The analyst's commentary underscores RTX Corp.'s potential to overcome current challenges and capitalize on future growth opportunities, particularly in the international defense sector, as it moves toward the latter half of the decade.
In other recent news, RTX Corp has been in the spotlight due to its robust financial performance and strategic developments. The company's third-quarter earnings report revealed an adjusted earnings per share (EPS) of $1.45, surpassing both estimated and consensus figures. This led to an upward revision of its 2024 adjusted EPS guidance to a range of $5.50 to $5.58. The company's revenue also saw an organic increase of 8%.
In addition to its financial performance, RTX Corp has secured significant contracts. The U.S. State Department approved a potential arms sale to Taiwan valued at approximately $2 billion, with RTX Corp as the principal contractor for the missile systems. Furthermore, the company bagged contracts totaling $676 million for the continued production of the TOW weapon system for the U.S. Army.
Analysts have responded positively to these developments. TD Cowen maintained a Buy rating on RTX Corp shares, citing strong defense orders and a promising book-to-bill ratio. Susquehanna reaffirmed its Positive rating and increased the price target to $150.00, while RBC Capital Markets adjusted its price target for RTX Corp. to $130.00. UBS also raised its price target for RTX Corp. to $133.00.
However, Goldman Sachs maintained a Neutral rating, expressing concerns over the Collins division's margin, defense market exposure, and uncertainties surrounding the Geared Turbofan engine. Despite these concerns, RTX Corp.'s strong quarterly results have been attributed to robust demand in both the commercial original equipment manufacturer (OEM) and aftermarket sectors, as well as in the Defense sector.
InvestingPro Insights
RTX Corp.'s recent performance and future outlook align with several key metrics and insights from InvestingPro. The company's market cap of $166.95 billion USD reflects its significant position in the Aerospace & Defense industry, supporting Deutsche Bank's analysis of RTX's potential for growth.
InvestingPro data shows a robust revenue growth of 17.82% over the last twelve months, with an impressive 49.21% quarterly growth in Q3 2024. This strong financial performance underpins the analyst's positive outlook on RTX's ability to capitalize on future opportunities, particularly in the international defense sector.
Two relevant InvestingPro Tips highlight RTX's financial strength and market position:
1. RTX has maintained dividend payments for 54 consecutive years, demonstrating long-term financial stability.
2. The company is expected to be profitable this year, aligning with Deutsche Bank's optimistic view on potential EBIT upside.
These insights, along with 11 additional tips available on InvestingPro, provide a comprehensive view of RTX's financial health and market position. For investors seeking a deeper understanding of RTX's potential, exploring the full range of InvestingPro Tips could offer valuable insights to complement the analyst's perspective.
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