By Pratyush Thakur and Mike Stone
(Reuters) -Aerospace and defense major RTX on Tuesday beat first-quarter earnings estimates, helped by demand for missile defense systems and strength in the commercial aftermarket business.
The aftermarket business gained as airlines had to extend the service life of aircraft to keep up with the recovery in air travel amid the limited availability of new commercial planes.
The Arlington, Virginia-based company reported revenue of $19.3 billion on a per-share profit of $1.34 for the quarter.
Analysts on average had expected revenue of $18.41 billion and earnings of $1.23 per share, as per LSEG data.
Pratt and Whitney, a subsidiary of RTX, reported a sales rise of 23% amid the ongoing inspection drive to check for potentially flawed components in its geared turbofan (GTF) jet engines.
The GTF engine issue relates to a powder metal used in engine parts, such as high pressure turbine disks and high-pressure compressor disks, that could result in micro-cracks and fatigue.
Following the quality crisis in some GTF engines last year, RTX estimated grounding of 350 jets annually from 2024 through 2026, outlining $6 billion to $7 billion in recall cost including compensating customers for lost capacity.
Chief Financial Officer Neil Mitchill told Reuters in an interview the company's negotiations with customers were progressing with agreements finalized with 9 customers who "represent a healthy portion of the fleet," and 6 more in process.
More than 40 customers operate the PW 1100 engine, he said.
RTX still expects about 350 aircraft to be grounded at any time due to engine removals, "we're essentially at the peak here in April. It will continue to be at about an average of 350 between 2024 and 2026. So, no changes to those assumptions," Mitchill said.
Pratt's operating profit declined as new engine deliveries offset aftermarket benefits. Engine makers often sell new units at discount to make profits over the life of the engine through aftermarket sales.
Driven by strong demand for both original equipment and aftermarket service, sales at RTX's Collins Aerospace unit, which makes avionics and aerospace components, rose 9%.
International demand for U.S. weaponry is soaring following Russia's invasion of Ukraine, the specter of Chinese aggression, and conflicts in the Middle East, with countries striking and negotiating new deals to buy arms and looking to speed up existing contracts.
Operating profit at RTX's defense arm, Raytheon (NYSE:RTN), jumped 74%, aided by its in-demand Patriot defense system, and gains from the divestiture of the cybersecurity, intelligence, and services business.
During the quarter, Raytheon booked a $1.2 billion order for Germany Patriot air and missile defense systems.