Raytheon Technologies Corporation (RTX) reported robust demand in the commercial aerospace sector and increased defense spending in its third-quarter 2023 earnings call. CEO Greg Hayes highlighted a record backlog of $190 billion and strong aftermarket strength for both wide-body and narrow-body aircraft. The company also announced the sale of Raytheon (NYSE:RTN)'s cyber services business for $1.3 billion and an accelerated share repurchase program of $10 billion.
Key takeaways from the call include:
- Strong demand in the commercial aerospace sector, with revenue passenger miles back to 2019 levels, and domestic air travel surpassing 2019 levels.
- The ongoing situation in Ukraine has led to significant demand for advanced air defense systems and munitions.
- The sale of Raytheon's cyber services business for approximately $1.3 billion and an accelerated share repurchase program of $10 billion.
- The company's Board approved an $11 billion authority to repurchase RTX shares, demonstrating confidence in the future and commitment to delivering shareholder value.
- The company is focused on managing the powdered metal manufacturing quality issue at Pratt & Whitney, with no significant incremental financial impact expected.
The company also highlighted its plans to increase capacity in the GTF network and bring more shops online to support the global GTF fleet. RTX recorded a 12% growth in organic sales and revised its sales outlook for the year, expecting approximately $74 billion, up 10% organically compared to the previous year.
Despite facing productivity and mix challenges due to fixed price development programs and higher production costs, Raytheon anticipates solid growth in 2024. The company plans to implement strategic initiatives to offset inflation and other challenges in 2024 while leveraging its strong balance sheet for a $10 billion ASR.
During the call, Christopher Calio, President of Pratt & Whitney, discussed the company's efforts to address the powdered metal issue affecting some of its engines. He reassured that inspections and life limits on the affected engines are largely manageable and will not have a significant financial or operational impact.
United Technologies Corporation (NYSE:RTX) (UTC), part of RTX, stated that it is comfortable with its $7.5 billion free cash flow target for 2025. The company expects to see a benefit from the US government's request for $106 billion in supplemental spending on national security priorities, including $50 billion for defense. These orders are expected to play out over the next 24 to 36 months, with the majority of revenue expected to come in 2023 and 2024.
RTX also discussed its ongoing conversations with customers regarding engine issues. The company acknowledged the challenges these conversations have posed, as some customers have expressed dissatisfaction with the fleet health even before the engine issues. The discussions are expected to continue into the early part of the next year.
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