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Wells Fargo cuts RTX Corp stock target, maintains overweight

EditorAhmed Abdulazez Abdulkadir
Published 04/25/2024, 07:10 AM

On Thursday, Wells Fargo made an adjustment to RTX Corp's (NYSE:RTX) financial outlook, lowering its price target slightly from $120.00 to $119.00, while still keeping an Overweight rating on the stock. The firm's analyst noted that the peak of the Grounded to Flight (GTF) engine recall AOGs (Aircraft on Ground) is a positive development.

The anticipated increase in margins at Collins Aerospace and Pratt & Whitney is significant. For Pratt, the improved margins are expected to result from a better product mix, as evidenced by a 64% growth in original equipment (OE) in the first quarter. Meanwhile, Collins Aerospace is likely to begin showing the benefits of cost-saving measures it has previously highlighted.

The analyst also pointed out that the GTF engine recall is now affecting the legacy engine aftermarket, as materials are being reallocated to address the recall. This reallocation is a noteworthy shift in the company's resource management.

Additionally, strong sustainment of the F-35 fighter jet contributed to Pratt's military division experiencing a robust 21% growth in the first quarter. This performance is seen as a positive indicator for RTX Corp's future, particularly for Howmet Aerospace (HWM (BMV:HWM)), which is involved in the aerospace industry.

The report reflects the ongoing challenges and opportunities within RTX Corp's operations. The company's efforts in addressing the GTF engine recall and the subsequent impact on its aftermarket services demonstrate its commitment to resolving issues while pursuing growth in different sectors of its business. The strong military growth, driven in part by the F-35 program, further underscores the strength of RTX Corp's military segment.

While the price target has been slightly reduced, Wells Fargo's continued Overweight rating indicates a belief in RTX Corp's potential for above-average returns.

The slight adjustment in the price target to $119.00 from $120.00 suggests a minor recalibration rather than a significant change in the company's overall prospects.

InvestingPro Insights

As RTX Corp navigates the aerospace industry's complexities, including the GTF engine recall and its impact on the aftermarket services, investors can gain further insights from real-time data and expert analysis. According to InvestingPro data, RTX Corp has a market capitalization of $133.97 billion, indicating its substantial presence in the market. Despite trading at a high earnings multiple with a P/E ratio of 40.79, the company has shown a revenue growth of 3.56% over the last twelve months as of Q1 2024, underscoring its ability to increase sales amidst challenging conditions.

InvestingPro Tips reveal that RTX Corp's management has been actively engaging in share buybacks, which can signal confidence in the company's future and often support the stock price. Additionally, RTX Corp has maintained dividend payments for an impressive 54 consecutive years, with a recent dividend yield of 2.34%, reflecting a stable return for income-focused investors.

For those considering an investment in RTX Corp, there are more InvestingPro Tips available that could further inform your decision. For instance, the company is a prominent player in the Aerospace & Defense industry and analysts predict it will be profitable this year, which aligns with the positive developments highlighted by Wells Fargo's report.

To access additional expert analysis and tips on RTX Corp, consider using the special coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With 8 more InvestingPro Tips available, investors can delve deeper into the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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