RTX (RTX) -) shares soared higher Tuesday after the defense contractor rode 'historic' demand to better-than-expected third quarter earnings that offset the impact of structural flaws found in its Pratt & Whitney engine division.
RTX posted a bottom line of $1.25 per share, up 3% from last year and topping Street forecasts, on adjusted revenues of $19 billion.
The group also added that Pratt & Whitney, the engine-making business it acquired through the $120 billion merger between Raytheon and United Technologies in 2020, fell to a $2.48 billion operating loss linked to the removal and inspection of a 'significant' number of GTF engines from Airbus A320neo airplanes
The engines, which are used by Airbus clients such as Delta Air Lines (DAL) -), were affected by a "rare condition in powder metal used to manufacture certain parts", according to RTX, and will require an "accelerated fleet inspection" over the coming year. CEO Greg Hayes, however, said the group won't see any "significant future incremental impact" from the unit going forward.
Looking into the final months of the year, RTX said it sees adjusted earnings in the region of $4.98 to $5.02 per share, a three cent improvement from its prior forecast, with free cash flow rising to around $4.8 billion.
"We have made significant progress on our assessment of the Pratt & Whitney powder metal manufacturing matter and expect the financial impact to be in line with the previously disclosed charge," said CEO Greg Hayes. "We are now focused on executing on our fleet management plans and are working relentlessly to mitigate further disruption to our customers. We do not expect any significant future incremental impact as a result of these fleet management plans."
"The historic demand across our commercial aerospace and defense businesses drove 12 percent organic sales growth during the third quarter and led to another record backlog of $190 billion," he added.
RTX shares were marked 7.3% higher in early Tuesday trading to change hands at $78.52 each, a move that would still leave the stock down more than 23% over the past six months.
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