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Raytheon Technologies Corp.’s stock tumbled 5% in premarket trade Tuesday to put it on track for a nine-month low, after the company said it needs to remove certain Pratt & Whitney engines from service for inspection earlier than expected.
The issue “has recently come to light,” the company said in a statement. The engine business has determined that a rare condition in powder metal used to make certain engine parts will require accelerated fleet inspection, it added.
The issue does not impact engines currently being produced, but a “significant” portion of the PW1100G-JM engine fleet, which powers the Airbus
AIR,
A320neo family of narrow-body airliners, will need to be removed and inspected in the next nine to 12 months, including about 200 accelerated removals due by mid-September.
“The business is working to minimize operational impacts and support its customers,” said the company. Management will provide additional detail on its earnings call scheduled for 8.30 a.m. Eastern.
Raytheon
RTX,
acquired Pratt & Whitney as part of its merger-of-equals transaction with the former United Technologies Corp. in 2020. The company recently announced plans to change its name to RTX Corp. on July 28.
“Given that RTX hosted an investor event at the Paris Air Show only last month, we had expected this to be a surprise free set of results,” said analyst Robert Stallard from Vertical Research Partners in a note to clients.
“So this fresh issue with the GTF engine, on top of the existing MRO issues, is another blow that the stock could do without. Additional details on the GTF problem are expected on the upcoming earnings call, and this is likely to overshadow what was otherwise a sound operating performance from RTX in 2Q,” he wrote.
Vertical Research has a buy rating on Raytheon’s stock.
Raytheon had net income of $1.327 billion, or 90 cents a share, for the quarter, up from $1.304 billion, or 88 cents a share, in the year-earlier period. Adjusted per-share earnings came to $1.29, ahead of the $1.18 FactSet consensus.
Sales rose to $18.315 billion from $16.314 billion, also ahead of the $17.683 billion FactSet consensus.
The company said it now expects full-year cash flow of about $4.3 billion, down from about $4.8 billion, It expects adjusted EPS of $4.95 to $5.05, compared with prior guidance of $4.90 to $5.05.
Sales are expected to range from $73.0 billion to $74.0 billion, up from prior guidance of $72.0 billion to $73.0 billion.
The stock has fallen 3.9% in the year to date, while the S&P 500
SPX,
has gained 18.6%.
