Raytheon boosted by strong travel demand

Stinger missile maker Raytheon Technologies beat analysts’ estimates for fourth quarter profit on Tuesday, as the aerospace and defence company fed off strong travel demand across the globe that boosted demand for its jet engines, parts and services.

Strong travel demand and supply chain disruptions have forced airlines to fly older aeroplanes for a longer period, boosting demand for high-margin aftermarket services at companies such as Raytheon, which counts Boeing and Airbus among its customers.

Raytheon reported an adjusted net income of $1.27 per share in the quarter ended December 31, above analysts’ average estimate of $1.24 per share, according to Refinitiv data.

“As I look back 12 months ago, we set some expectations. And I would say the commercial aerospace recovery was right in line with the high end of those expectations,” CFO Neil Mitchell said in an interview, but in 2023 he expects headwinds from taxes and pensions.

Raytheon’s shares were up slightly in early trading to $96.59.

The company expects to see about $2bn worth of labour and material inflation in 2023, Mitchell told Wall Street analysts on a post-earnings conference call. He added that in the year the company expects a 20% boost in commercial aftermarket revenue across its aerospace business.

The maker of Tomahawk missiles forecast 2023 adjusted profit in the range of $4.90 to $5.05 per share, compared with analysts’ average estimate of $5.03 per share.

The Arlington, Virginia-based company’s avionics unit, Collins Aerospace, reported a 14.6% increase in its quarterly sales and a 60.7% jump in operating profit in the reported quarter. Net sales were up 6.2% at $18.09bn, but missed analysts’ average estimate of $18.15bn.

The defence industry, even though hit by supply chain snarls, has gained from geopolitical tensions since Russia’s invasion of Ukraine 11 months ago, pushing countries to ramp up defence budgets.

Raytheon’s missiles and defence unit sales were up 6.2% to $4.1bn in the fourth quarter.

The company expects share repurchases of $3bn in 2023 and said it will realign its portfolio to three business segments including Collins Aerospace, Pratt & Whitney and Raytheon, down from four segments.

Reuters