RTX upgraded to Neutral at Bank of America on jet-engine repairs

RTX (NYSE:RTX) on Thursday was upgraded to Neutral from a previous investment rating of Underperform by analysts at Bank of America Securities. They said the aerospace and defense company, which until last year was called Raytheon Technologies, is recovering from a jet-engine recall at its Pratt & Whitney unit.

In July, microscopic contaminants were discovered in powdered metal used to make high-pressure turbine discs for the unit’s Geared Turbofan engines, which power A321ceo planes made by Airbus (OTCPK:EADSF) (OTCPK:EADSY). RTX recalled about 1,200 of the engines for removal from planes and inspections.

“Pratt & Whitney is not only delivering new full-life disks ahead of expectations. It is also fixing affected engines faster,” Ronald Epstein, analyst at BofA, said in a January 25 report.

He said RTX also is benefiting from growth at its Collins Aerospace unit, which makes airplane parts and software. It also provides what are known as aftermarket services, or the repair, maintenance and upgrades of aerospace and defense equipment.

“We continue to see Collins Aerospace as the best positioned RTX business unit,” BofA said. “Demand remains strong across both commercial original equipment and aftermarket end markets.”

RTX’s Raytheon defense business is working to improve profitability amid supply-chain constraints and limitations with fixed-price contracts.

“While Raytheon defense is making progress turning around the business, the timing of the turnaround could offset mid-term profitability prospects,” Epstein said. “The unit is implementing stronger supplier inflation protection on contracts going forward, taking a more disciplined approach to contract selection.”

BofA raised its price target on RTX (RTX) to $100 a share from $78 a share previously, based on a discounted cash flow estimate.

RTX (RTX) on Tuesday reported quarterly results that were better than expected on the strength of aviation sales.