Long-established in the Aerospace & Defense industry, RTX Corp (RTX, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.23%, juxtaposed with a three-month change of -6.09%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of RTX Corp.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 7/10
- Growth rank: 3/10
- GF Value rank: 7/10
- Momentum rank: 2/10
Based on the above method, GuruFocus assigned RTX Corp the GF Score of 68 out of 100, which signals poor future outperformance potential.
RTX Corp Business Overview
RTX Corp, with a market cap of $114.07 billion and sales of $67.09 billion, is a diversified aerospace and defense industrial company formed from the merger of United Technologies and Raytheon. The company operates in three segments: Collins Aerospace, a diversified aerospace supplier; Pratt & Whitney, an aircraft engine manufacturer; and Raytheon, a defense prime contractor providing a mix of missiles, missile defense systems, sensors, hardware, and communications technology to the military. The company's operating margin stands at 4.51%.
Financial Strength Analysis
RTX Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 2.11 positions it worse than 81.12% of 196 companies in the Aerospace & Defense industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just 1.71, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.15 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where RTX Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -4.9 per year over the past three years, which underperforms worse than 71.32% of 265 companies in the Aerospace & Defense industry. Over the past five years, RTX Corp has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -8.1, while the five-year growth rate is at -11.3. These figures underscore potential challenges in the company's profitability. Lastly, RTX Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While RTX Corp has a rich history in the Aerospace & Defense industry, its current financial indicators and growth prospects suggest that it may struggle to maintain its historical performance. As value investors, it's crucial to consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
