RTX, a leading player in the aerospace and defense industry, has become a focal point for investors on Zacks.com. To understand its near-term potential, we’ll delve into key factors influencing RTX’s stock performance. Over the past month, RTX shares have risen by +0.7%, outperforming the Zacks S&P 500 composite’s +1.6% gain. During this period, the broader Aerospace – Defense industry, where RTX operates, has experienced a slight decline of 0.9%. But what does the future hold for RTX? While market chatter and news often create short-term fluctuations, we at Zacks prioritize fundamental analysis for long-term investment decisions.
At the heart of our analysis lie earnings estimate revisions. We believe that a company’s intrinsic value is determined by its future earnings potential. Our focus is on understanding how sell-side analysts are adjusting their earnings projections based on recent business trends. When earnings estimates increase, the perceived fair value of a stock rises, enticing investors to buy and potentially pushing its price upwards. Conversely, downward revisions can lead to a decrease in stock price.
RTX is expected to report earnings of $1.33 per share for the current quarter, representing a year-over-year increase of +6.4%. Over the past month, the Zacks Consensus Estimate has seen a slight upward adjustment of +0.1%. For the current fiscal year, the consensus earnings estimate of $5.45 suggests a +7.7% growth compared to the previous year. This estimate has also been revised upwards by +0.2% over the past month. Looking ahead to the next fiscal year, the consensus earnings estimate of $6.43 indicates a significant +17.9% growth compared to the previous year. Notably, this estimate has remained unchanged over the past month.
Our proprietary Zacks Rank, a powerful tool based on an impressive track record, offers a comprehensive indicator of a stock’s near-term price performance. It leverages earnings estimate revisions, taking into account the size of recent changes alongside other crucial factors related to earnings expectations. Based on our analysis, RTX currently holds a Zacks Rank #3 (Hold).
The chart below illustrates the evolution of RTX’s forward 12-month consensus EPS estimate:
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While earnings growth is a strong indicator of a company’s financial health, sustainable revenue growth is essential. A company cannot consistently increase earnings without a corresponding rise in revenue. It is crucial to understand a company’s potential revenue growth. For RTX, the consensus sales estimate for the current quarter stands at $19.95 billion, indicating a year-over-year increase of +5.3%. Looking at the current and next fiscal years, the estimates of $79.63 billion and $83.55 billion suggest growth rates of +7% and +4.9%, respectively.
In the last reported quarter, RTX reported revenues of $19.72 billion, a year-over-year increase of +7.7%. Earnings per share (EPS) reached $1.41, compared to $1.29 a year ago. These figures exceeded the Zacks Consensus Estimate of $19.31 billion for revenue, representing a surprise of +2.15%. The EPS surprise was a noteworthy +9.3%. Impressively, RTX has consistently exceeded consensus EPS estimates in each of the trailing four quarters and topped consensus revenue estimates throughout this period.
No investment decision is complete without evaluating a stock’s valuation. A stock’s current price should accurately reflect the intrinsic value of the underlying business and its growth prospects. Comparing a company’s valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its historical values helps determine if its stock is fairly valued, overvalued, or undervalued. Further, comparing the company’s valuation metrics to its peers provides valuable insights into the reasonableness of the stock’s price.
As part of the Zacks Style Scores system, the Zacks Value Style Score, which considers both traditional and unconventional valuation metrics, categorizes stocks into five groups ranging from A to F (A being the most favorable). This score assists in identifying whether a stock is overvalued, fairly valued, or temporarily undervalued. RTX has been assigned a C grade on this front, indicating that it is trading in line with its peers.
The information discussed here and other insights available on Zacks.com can help you determine if RTX warrants your attention amidst the market buzz. However, its Zacks Rank #3 suggests that it may perform in line with the broader market in the near term.
