Air travel trends drive demand for aircraft maintenance, leading to Raytheon Technologies (RTX.US) beating Q2 earnings expectations.
1min read Raytheon Technologies(RTX.US) beat Wall Street's earnings expectations in the second quarter as strong demand for air travel boosted the company's commercial aerospace business.
Raytheon Technologies reported adjusted earnings per share of $1.41 in Q2, beating the consensus estimate of $1.30. The company expects adjusted earnings per share of $5.35 to $5.45 for the full year, above the prior guidance of up to $5.40.
The results show Raytheon Technologies' new CEO Chris Calio is dealing with growing demand for aircraft parts and services. Supply chain issues are currently hampering production by suppliers and aircraft manufacturers Boeing(BA.US) and Airbus.
Raytheon Technologies now expects free cash flow of about $4.7 billion this year, below the prior estimate of about $5.7 billion and below the market estimate of $5.65 billion.
The company is recalling about 3,000 Pratt & Whitney-built turbofan engines, due to a defect in the engines, which are one of the main engines on Airbus's popular A320neo series of aircraft.
The recall will result in hundreds of A320neo aircraft grounded for years, impacting airlines such as Spirit Airlines(SAVE.US) and Wizz Air. Raytheon Technologies is also under investigation by U.S. securities regulators for recall disclosure.
Analyst Cai von Rumohr at TD Cowen cited data from aircraft market research firm Cirium in a July 2 research note that the number of aircraft grounded for maintenance each year is around 540. This data aligns with Raytheon Technologies' expectation that the number of grounded aircraft reached a peak in the first quarter, below the initial estimate of 650.
Raytheon Technologies has also been actively evaluating its investment portfolio to reduce debt. Earlier this month, the company agreed to sell a division of Collins Aerospace to Signia Aerospace, backed by Arcline Investment management. Raytheon Technologies is also selling its drive and flight controls business to Safran Group.
Raytheon Technologies shares were up 3.47% at $108.47 at the time of writing.