Why RTX stock price fell in 2023
aerospace giant RTX (RTX 0.54%) Although it came into 2023 with a new name and significant promise, the company ran into unexpected headwinds in the form of a massive engine recall.
Details slowly leaked out, and over time it became clear that fixing it would be expensive. Investors decided not to wait for a turnaround, and the stock fell 35% from its lowest point this year.
Although the stock recovered somewhat in the final months of 2023, it was still a year to forget for RTX investors. RTX’s stock price will fall 16.6% in 2023, according to data provided by S&P Global Market Intelligence. S&P 500 It increased by more than 40% points.
Costly engine problems reduce profits
RTX, the commercial aerospace and defense giant known as Raytheon Technologies until 2023, counts Pratt & Whitney (P&W) aircraft engines as one of its main businesses. P&W is one of the world’s largest engine producers and was a cash-generating machine for RTX during the good times, but it ran into trouble during those years.
Last July, RTX disclosed issues with the PW1100G-JM engine. airbus A320neo requiring costly repairs.
The stock continued to plummet in September, when RTX finally quantified the financial impact of its engine issues. The company said it would need to remove more than 700 engines over the next three years for inspection. This is a costly and time-consuming task required to compensate for airline downtime.
Overall, RTX said it expects to record a pre-tax operating profit charge of at least $3 billion related to the matter. The company also lowered its full-year sales guidance for 2023 and warned that engine problems could impact free cash flow through 2025.
Is RTX Stock Headed to 2024?
The Pratt & Whitney accident was a major blow to RTX, but not fatal. The A320neo is one of the most popular airframes in the world, and with long engine waiting lists, there is little opportunity for customers to look elsewhere even if they wanted to. RTX is smart about working with airlines to compensate for their problems and maintain long-term relationships.
In addition to Pratt & Whitney, RTX has a variety of custom missiles, anti-missile systems and other defense products through its Raytheon division, as well as its large Collins Aerospace commercial business. The company remains committed to returning more than $35 billion to shareholders by 2025 despite P&W’s cash outflow, a testament to the company’s scale and strength.
It will take time to fix the engine issues, but RTX appears to have contained the problem and has it under control. Investors are seeing evidence that RTX is getting Pratt & Whitney back on track, so this stock is a good candidate for a 2024 rebound.
