September 17, 2021 8:00 AM
 — 
3
 min

Aviation Market Recovery Will Support Raytheon Technologies Business

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Despite the short-term negative impact of the new Delta coronavirus strain, the aviation recovery will provide significant support to Collins and Pratt's business in 2022 with the potential to increase EPS to $ 4.8. Raytheon Technologies is competing with General Electric and Rolls-Royce to retool the B-52 fleet as part of a $ 11 billion 608 engine program. We think Pratt has an advantage as the company offers a derivative of the proven PW800 and supplies all of the previous generation engines for the B-52, which enhances the company's integration expertise. The air travel market began to grow, albeit at a slower pace than previously expected, as the positive momentum in Europe is partially offset by weaker demand for air services in China and the United States. As a result, we cut our estimate of Raytheon Technologies' 2021 revenue by $ 0.2bn to $ 64.65bn. However, we expect to see EPS at $ 4.02 against the market consensus of $ 4.07.

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Raytheon Technologies hit profitable levels in the second quarter. Net income in April-June was $ 1.03 billion, or $ 0.68 per share, compared with a net loss of $ 3.84 billion, or $ 2.55 per share, in the same period last year. Profit excluding one-off factors was $ 1.03 per share, beating the market average forecast of $ 0.93 per share. Raytheon Technologies 'quarterly revenue increased 13% to $ 15.88 billion against the consensus forecast for this indicator of $ 15.83 billion. Raytheon Technologies' free cash flow in the last quarter was $ 966 million, beating the average analyst forecast of $ 775.8 million. Raytheon Technologies raised its forecast for adjusted earnings per share for 2021 to $ 3.85-4 from $ 3.5-3.7, revenue forecast - to $ 64.4-65.4 billion from $ 63.9-65.4 billion.Raytheon Technologies is the merger of UTX's aerospace ops (Pratt & Whitney, and Collins Aerospace Systems) and Raytheon, a producer of missile defense systems, missiles, and defense electronics.

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