UPDATE 3-RTX beats Q3 estimates, approves $10 bln share repurchase
9:53 AM ET, 10/24/2023 - Reuters
(Adds details on engines impacted in 6th paragraph)
By Pratyush Thakur and Mike Stone
Oct 24 (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.
The powdered metal issue has forced RTX to shorten the expected life of certain parts for the PW1500 and PW1900 engines, which will cause "some incremental" groundings of Airbus A220s and Embraer E2 aircraft in the first half of 2024. RTX also expects to remove and inspect 100 V2500 engines, which power A320ceo aircraft, over the next four years.
Despite other engine types impacted by the metal contaminant issue, Chief Financial Officer Neil Mitchill told Reuters in an interview on Tuesday 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 after-market 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 segment for around $1.3 billion.
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