What Awaits Raytheon Technologies (RTX) in Q3 Earnings?

Zacks Equity Research
·3-min read

Raytheon Technologies Corp. RTX is set to release third-quarter 2020 results on Oct 27, before market open.

The company delivered earnings surprise of 300.00% in the last-reported quarter. The Zacks Consensus Estimate for the company’s third-quarter earnings of $2.85 remained unchanged over the past 30 days.

Factors to Note

On Apr 3, 2020, missile-maker Raytheon Company completed its merger with multinational conglomerate United Technologies to form aerospace and defense giant Raytheon Technologies. The combined company’s third-quarter results are expected to reflect the positive synergies from the merger.

Moreover, incremental cost synergies from the previous acquisition of Rockwell Collins are also projected to benefit Raytheon Technologies’ results.

Raytheon Technologies Corporation Price and EPS Surprise

Raytheon Technologies Corporation Price and EPS Surprise
Raytheon Technologies Corporation Price and EPS Surprise

Raytheon Technologies Corporation price-eps-surprise | Raytheon Technologies Corporation Quote

While slow recovery is being observed in the aviation industry, uncertainty still prevails with respect to the overall macro environment and commercial air traffic courtesy of the lingering coronavirus impact. Therefore, adverse impacts of COVID-19 on the aerospace industry that have been affecting commercial OEM as well as commercial aftermarket sales, are expected to have once again dragged down the company’s revenues.

On the cost front, while COVID-19 induced expenses along with ongoing integration related costs have been escalating Raytheon Technologies’ quarterly expenditures, its accelerated progress in cost mitigation actions during the second quarter might have mitigated the overall pressure on third-quarter earnings.

Q3 Expectations

Currently, the Zacks Consensus Estimate for Raytheon Technologies’ earnings is pegged at 48 cents on revenues of $15.37 billion, indicating 78.3% and 21.2% decline from the respective year-ago quarter numbers, which are derived from combining the quarterly figures of legacy Raytheon and United Technologies.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Raytheon Technologies this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That’s not the case here.

Earnings ESP: Raytheon Technologies has an Earnings ESP of +8.71%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Upcoming Releases

Here are some defense companies you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases:

Northrop Grumman  NOC has an Earnings ESP of +1.23% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

L3Harris Technologies LHX has an Earnings ESP of +0.57% and a Zacks Rank #3.

A Recent Defense Release

Lockheed Martin LMT reported third-quarter 2020 earnings from continuing operations of $6.25 per share, which surpassed the Zacks Consensus Estimate of $6.07 by 3%. The bottom line also improved 10.4% from the year-ago quarter’s $5.66.  

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