RTX Corporation (NYSE: RTX) reported strong earnings in their Q1 2024 report, with sales up 12% year-over-year, earnings growth of 32%, and profit margins improving to 8.9%. Despite these positive results, the company’s stock price barely moved, leaving investors wondering if the stock deserved a better reaction from the market. RTX’s defense division was a significant contributor to its success, with notable sales including $1.6 billion in classified bookings and $1.2 billion in Patriot anti-air defense systems sold to Germany.
While the Raytheon defense division garnered significant attention, RTX’s Collins Aerospace and Pratt & Whitney divisions performed exceptionally well. Collins Aerospace saw 9% sales growth, while Pratt & Whitney experienced a 23% increase year-over-year. However, despite strong sales growth, both divisions saw a decline in profit margins, which presents a challenge for the company. Nonetheless, if these divisions can maintain their growth while improving their margins, RTX’s profitability could increase significantly.
Looking ahead, RTX anticipates total sales growth of 14% and a potential doubling of earnings to over $5.25 per share in 2024. The company’s investments in research and development are expected to drive growth, and improvements in profit margins could further enhance profitability. Although RTX’s stock is currently trading at a premium compared to historical averages, the company’s growth potential and market conditions may justify these valuations. While RTX stock may not be the top pick among defense stocks, it could still offer favorable returns for investors in the long run.
Before investing in RTX, investors should consider other opportunities identified by The Motley Fool Stock Advisor team. While RTX did not make their list of top stocks, the team has selected 10 stocks with potential for significant returns in the coming years. The Stock Advisor service provides guidance on building a successful portfolio, regular updates from analysts, and two new stock picks each month. Past recommendations from the service have outperformed the S&P 500 by a wide margin since 2002, offering investors a solid blueprint for long-term success in the stock market.
In conclusion, RTX Corporation delivered impressive results in its Q1 earnings report, driven by strong sales growth and improved profit margins across its divisions. While the stock price reaction was relatively muted, the company’s growth prospects and strategic investments indicate potential for further gains. Investors should weigh the valuation of RTX stock against its growth potential and consider alternative investment opportunities recommended by financial analysts to maximize returns in their portfolio.
