RTX Corporation reported strong earnings in the first quarter of 2024, with sales up 12% from the previous year and earnings growing by 32%. Profit margins also improved, but the market response was lackluster, with the stock price increasing only slightly. Despite the positive financial results, investors were left wondering why the stock did not see a more significant jump.
One of the key factors in RTX’s strong performance was its defense division, which saw significant sales growth and a substantial backlog of future work. The company highlighted several major defense contracts, including classified bookings and missile systems deliveries to Ukraine and Germany. However, it was RTX’s civilian divisions, Collins Aerospace and Pratt & Whitney, that outshone the defense segment, with both reporting strong sales growth.
While the Raytheon defense division had the highest profit margin in Q1, Collins Aerospace and Pratt & Whitney saw faster sales growth. Although both civilian divisions experienced a decline in profit margins, their strong revenue growth suggests that they could drive overall profitability for the company. RTX’s financial guidance anticipates further growth in sales and earnings, with a potential doubling of earnings to over $5.25 per share.
Despite the positive outlook for RTX, the stock is currently trading at historically high valuations, which may give some investors pause. However, the company’s plans for increased research and development spending suggest a commitment to future growth. While RTX may not be the top pick among defense stocks, its strong performance and growth potential could still make it an attractive investment opportunity.
The Motley Fool Stock Advisor team has identified 10 stocks with significant growth potential, although RTX is not among them. The service offers guidance on building a successful investment portfolio and has a strong track record of outperforming the S&P 500 index. Investing in RTX or other recommended stocks could yield substantial returns over the long term based on historical performance.
