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Raytheon (RTX) Gets a Nod for a $6B Share Buyback Program

Raytheon Technologies Corp. RTX recently received a nod from its board of directors for a share buyback program. Per the authorization, the company can repurchase up to $6 billion of the outstanding common stock. This signifies RTX’s strong financial strength and ability to deploy capital effectively.

The recently announced program is a replacement to the previously announced share buyback authorization of $3.5 billion of its common stock under the Dec 7, 2021 share repurchase program.

Can Raytheon Sustain the Share Buyback Program?

A share buyback program is backed by the strong financial position of a company and its ability to generate excess cash to distribute among shareholders, mainly to increase their worth. It is imperative to mention that Raytheon Technologies’ cash and cash equivalents were $5.38 billion as of Sep 30, 2022, up sequentially from $4.77 billion.

Also, Raytheon Technologies expects to generate free cash flow worth approximately $6 billion in 2022. This highlights its capability to sustain the share buyback program through excess cash.

Moreover, the generation of higher revenues and earnings from business operations should assist in attaining a steady inflow of cash in the business to support the company’s intent to increase shareholders’ value. RTX’s total revenues increased 5% year over year in the last reported quarter, thus signifying a strong top line.

Going forward, the company expects revenues in the range of $67.00-$67.30, while earnings are anticipated in the band of $4.70-$4.80 per share. The midpoint of the guided range suggests an improvement of 11.2% from the earnings of $4.27 reported in 2021. The midpoint of the revenue guidance range signifies growth of 4.3% from the prior-year reported figure.

Additionally, the solid order flow and the backlog of the company are likely to remain strong. These make us optimistic about the revenue growth prospects of the company, which will boost its bottom line in the long run.

Raytheon Technologies’ total backlog was approximately $168 billion as of Sep 30, 2022 compared with $156 billion as of Dec 31, 2021. Underpinned by such solid revenue generation prospects and strength in business activities, one may safely conclude that RTX may continue to effectively deploy capital through share buyback activity.

Peer Moves

Defense majors that have repurchased shares to show the financial strength of their businesses and increase shareholders’ worth are as follows:

In November 2021, Northrop Grumman NOC announced that it entered into an accelerated share repurchase agreement with Goldman Sachs & Co. LLC to repurchase $500 million of the common stock.

Northrop boasts a long-term earnings growth rate of 3.3%. Shares of NOC have increased 41.9% in the past year.

Curtiss-Wright CW has been rewarding shareholders with increased share repurchase activity and dividends regularly. In November 2021, the company hiked its share buyback authorization by $100 million.

The Zacks Consensus Estimate for Curtiss-Wright’s 2022 earnings suggests a growth rate of 10.6% from the prior-year reported figure. CW shares have soared 28% in the past year.

Hexel Corporation HXL has $217 million remaining authorization under the share repurchase program as of Sep 30, 2022. The company expects free cash flow of $100 million in 2022.

The Zacks Consensus Estimate for Hexel’s 2022 earnings implies a solid growth rate of 344.4% from the prior-year reported figure. HXL shares have risen 18% in the past year.

Price Movement

In the past year, shares of Raytheon Technologies have rallied 18.6% compared with the industry’s growth of 6.3%.

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Zacks Investment Research

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Zacks Rank

Raytheon Technologies currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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