Highlights
- Shares of RTX, formerly Raytheon, plunged after the company revealed it was dealing with a faulty engine part.
- Pratt & The Whitney Division discovered the problem with the engines that power the Airbus A320neo.
- RTX cut its free cash flow outlook for the full year because of the problem.
RTX Corporation (RTX) was the worst-performing stock in the S&P 500 on Tuesday after former Raytheon Technologies warned that a faulty jet engine part will require “expedited fleet inspection.”
The defense contractor indicated that its Pratt & The Whitney Division discovered a “rare condition in the metal powder” used to make certain engine parts. He added that the problem does not affect motors that are already in use.
RTX explained that it anticipates that due to the issue, a “significant portion” of the PW1100G-JM engine fleet will require expedited retirements and inspections over the next nine to 12 months, including approximately 200 accelerated withdrawals by mid-September. The engine powers the Airbus A320neo.
The company said it was taking steps to minimize operational impacts and working to support its customers.
CEO Greg Hayes said the issue led RTX to cut its 2023 free cash flow estimate by half a billion dollars to $4.3 billion.
The news sent shares tumbling to a nine-month low, even as RTX reported better-than-expected second-quarter results. Earnings per share (EPS) came in at $1.29 and sales jumped 12% to $18.23 billion. Both were more than analysts forecast.
The company also raised its full-year EPS guidance low to $4.95 to $5.05 from $4.90 to $5.05, and revenue to a range of 73 $74 billion to $74 billion from $72 billion to $73 billion. billion.
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Source: investopedia.com