China chip stocks rally on self-reliance bets, Nvidia scrutiny
On Wednesday, UBS analyst Gavin Parsons (NYSE:PSN) updated the financial outlook for RTX Corp. (NYSE: RTX), raising the price target to $142.00 from $128.00, while keeping a Neutral rating on the stock. The stock has shown remarkable momentum, delivering a 45.83% return over the past year and trading near its 52-week high of $132.43. According to InvestingPro analysis, RTX is currently fairly valued. Parsons noted that RTX has been executing well amidst robust end-market demand. Despite the number of grounded GTF aircraft not yet showing a downward trend, it remains within the company’s initial guidance.
RTX’s cash flow is on the rise, benefiting from the overall business performance, with levered free cash flow reaching $7.9 billion in the last twelve months. The company maintains a strong financial position, earning a GOOD overall health score from InvestingPro, which offers 12 additional investment tips for RTX. Even though the aftermarket growth has decelerated, it is still expanding at a double-digit rate, contributing to impressive 17.82% revenue growth. The company’s OE guidance cautiously includes potential impacts from the 737 MAX, but recent positive developments from Boeing could suggest medium-term growth opportunities. The Defense sector continues to exhibit strength, with a significant Raytheon (NYSE:RTN) book-to-bill ratio despite some budget uncertainties and the DOGE factor.
Margins within RTX’s various segments are improving gradually, although the Collins segment did not meet UBS’s expectations. With a gross profit margin of 19.3% and a market capitalization of $170.8 billion, RTX remains a prominent player in the Aerospace & Defense industry. Parsons projects a 70 basis point increase in segment EBIT margin for 2025. The firm has also raised its EBITDA forecasts and anticipates stronger cash flow in the future, estimating $9.9 billion in 2027. However, UBS does not predict an overachievement of the 2025 free cash flow (FCF) guidance, even with a substantial working capital contribution.
In other recent news, RTX Corp has seen significant activity from analysts and has secured notable defense contracts. Vertical Research Partners raised RTX Corp’s price target to $159 and maintained a Buy rating following the company’s fourth-quarter results. Citi analyst Jason Gursky also upgraded RTX Corp’s stock rating from Neutral to Buy, projecting the company could generate about $10 billion in free cash flow by 2027.
RTX Corp has also shown interest in Boeing Co (NYSE:BA).’s Jeppesen navigation unit, which is up for sale and could fetch a price between $6 billion and $8 billion. This is part of Boeing’s strategy to streamline operations and focus on core businesses.
In terms of contracts, RTX Corp has secured a $529 million contract to supply the Netherlands with a Patriot air and missile defense system fire unit. Despite these advancements, Wizz Air, a client of Pratt & Whitney, a division of RTX Corp, has expressed concerns over ongoing issues with Pratt & Whitney engines, expected to persist for four to five years. These are the recent developments at RTX Corp and Boeing Co.
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