1 Wall Street Analyst Thinks RTX Stock Is Going to $96. Is It a Sell?
RBC Capital recently raised its price target on aerospace and defense giant (NYSE: RTX) to $96 from $88 while maintaining a "sector perform" rating on the stock. With the stock trading around $101, the updated price target suggests a 5.3% price drop over the next 12 months. I would also argue that a "sector perform" rating is, de facto, a sell rating. You can buy the sector through an ETF, so there's no need to take on stock-specific risk by buying RTX.
The RBC analyst is right to be cautious about the stock but for slightly different reasons. Delivery delays at Boeing will indeed pressure the original equipment market (OEM), especially RTX's Collins Aerospace business. Still, the key issues for RTX were identified by soon-to-be CEO Chris Calio on the fourth-quarter earnings call in January: "We have two matters we've been heavily focused on, Pratt's powdered metal situation, and Raytheon's margins."
The Pratt issue refers to removing and inspecting airplane engines manufactured with potential contamination in a powder coating used to manufacture turbine discs on engines. Management has previously disclosed that the "majority of incremental engine removals will occur in 2023 and early 2024." As such, management will likely give a more definitive update on the likely final costs and cash flow hit during the first half of 2024.
Source Fool.com
