By Mike Stone and Pratyush Thakur
WASHINGTON (Reuters) - Raytheon Technologies (NYSE:RTX) Corp reported a 4% rise in quarterly adjusted profit on Tuesday, as the aerospace and defense company saw strong Chinese demand for commercial aircraft spare parts and services.
"The rebound in China was explosive," chief financial officer Neil Mitchell said in an interview. "We really saw a huge return to domestic China travel - they're nearly at pre-pandemic levels today."
A stronger-than-expected travel recovery has forced airlines to keep older jets in service for longer, helping companies such as Raytheon (NYSE:RTN) through sales of spare parts and other aftermarket services.
Raytheon's Pratt & Whitney business, which makes engines for the Airbus A320neo family of aircraft, reported a 41% jump in adjusted operating profit and a 15% rise in adjusted sales in the first quarter. Mitchell said demand from China had benefited Pratt as well.
China's commercial aviation industry buys Pratt & Whitney aircraft engines, as well as landing gear and controls from Raytheon.
Supply chain snags and labor shortages, however, continued to weigh on the company's missiles and defense business, which reported a 13% fall in adjusted operating profit in the quarter through March.
Mitchell said because of a strong backlog he expected revenue for the defense business to grow in the mid-single-digits over the coming years.
Raytheon outlined some details of its previously announced realignment into three business units, Collins Aerospace, Raytheon and Pratt & Whitney.
Some communications business lines will move from the Intelligence and Missiles units to the Collins Aerospace unit and some sensing and imaging businesses will move from Collins unit to the Raytheon business unit, which will be led by Wes Kremer, currently president of Raytheon Missiles & Defense.
In February, China put Lockheed Martin (NYSE:LMT) and Raytheon Missile and Defense - a unit of Raytheon Technologies - on an "unreliable entities list" over arms sales to Taiwan.
Overall, Raytheon quarterly sales rose 10% to $17.21 billion, beating Wall Street analyst estimates of $16.97 billion. Adjusted profit rose to $1.79 billion from $1.72 billion a year earlier.
"Continued global airline travel and defense systems demand point to sustained top line growth," Raytheon Chief Executive Greg Hayes said in a statement.
On a per share basis, the company posted adjusted profit of $1.22. Analysts on average were expecting a profit of $1.13 per share, according to Refinitiv data.
The Arlington, Virginia-based company reaffirmed its annual sales outlook of $72 billion to $73 billion and adjusted profit per share forecast of $4.90 to $5.05.