Shares in the parent of major Tucson employer Raytheon fell about 10% Tuesday after the company revealed a defect in an airliner jet engine made by its Pratt & Whitney division with its second-quarter earnings report.
Aerospace and defense giant RTX Corp. reported second-quarter earnings of $1.33 billion, or 90 cents per share, on revenue of $18.32 billion, without adjustment for acquisition accounting and non-recurring charges.
On an adjusted basis, RTX beat Wall Street estimates with earnings of $1.29 per share, up 11 cents from second-quarter 2022 and topping the average analyst estimate for $1.17 per share, according to Zacks Investment Research.
But the company also announced a problem with metals used by Pratt & Whitney in manufacturing its PW1100G-JM jet engine, which powers the Airbus A320neo, that will require accelerated removals and inspections over the next year.
A flaw in a jet engine made by Pratt & Whitney sent shares in parent RTX down as it reported otherwise positive second-quarter 2023 results for all its divisions including Tucson-based Raytheon Missiles & Defense.
RTX didnβt estimate the expected cost to correct the engine defect, which will include about 200 accelerated removals by mid-September of this year, but the news sent the companyβs shares down.
RTX shares closed Tuesday at $87.10 per share, down $9.92 or 10.2%, in trading on the New York Stock Exchange.
RTX Chairman and CEO Greg Hayes said accelerating demand in global commercial aerospace and strong defense spending fueled 12% sales growth and increased operating profit year-over-year, with revenue growth across all RTX business units.
Hayes said the company was raising its full-year sales outlook and tightening its range for earnings per share, while lowering its outlook for free cash flow to reflect the impact of the Pratt & Whitney engine issue.
βThe continued safe operation of our fleet will always remain our number one priority,β Hayes said in the earnings release.
On a conference call Tuesday, RTX President and Chief Operating Officer Christopher Calio said about 1,200 engines overall will need to be removed and inspected for a rare flaw in powdered metal used in some parts, noting that the cost has not yet been determined.
Sales at Raytheonβs Tucson-based Missiles & Defense unit, the Tucson regionβs biggest employer with about 13,000 local workers, totaled $4 billion in the second quarter, up 12%, while its operating profit rose 23% on an adjusted basis to $348 million.
Major contracts during the second quarter included $1.2 billion for AMRAAM air-combat missile production, $294 million in classified bookings, $265 million for Javelin anti-tank missiles, $251 million for AIM-9X Sidewinder production and $237 million for a counter-drone system for the Army.
Raytheon Intelligence & Space had second-quarter sales of $3.66 billion, up 2% percent versus the prior year on increased demand for its sensing and cyber services, but operating income fell 8% on an unfavorable program mix and higher costs.
Pratt & Whitney posted a 15% increase in sales, to $5.7 billion, but its operating profit dipped 24% due to a customer insolvency that cost $181 million.
Meanwhile, RTXβs Collins Aerospace business posted second-quarter sales of $5.85 billion, up 17%, while operating profit rose 36% on an adjusted basis to $837 million.
RTX announced in June it would stop using the name Raytheon Technologies and restructure its business to include just three operating entities β Raytheon, Collins Aerospace and Pratt & Whitney.
