Raytheon Technologies on Tuesday said it swung to a loss in the second quarter largely due to a slump in commercial aerospace triggered by the ongoing COVID-19 pandemic. The company’s defense businesses performed well.
The commercial outlook remains weak and the company has achieved its cost savings synergies for the year.
Sales in the quarter were $14.1 billion, and included $6.7 billion from the former Raytheon Co., which was acquired by United Technologies Corp. at the start of the quarter to create Raytheon Technologies. The results exclude Raytheon Co. sales from 2019, but the company said legacy Raytheon sales were up in the low single digits percentwise.
In April, the Air Force announced Raytheon as the sole-source contractor for production of its Long-Range Standoff Weapon (LRSO) nuclear-tipped cruise missile. The service expects to acquire has roughly 1,000 LRSO missiles, which it plans to start deploying in the late 2020s.
The net loss in the quarter was $3.8 billion, $2.55 earnings per share (EPS), versus $1.9 billion, $2.20 EPS, in net income a year ago. Excluding adjustments related to COVID-19, acquisition accounting, restructuring, and other costs, adjusted net income of $598 million ($0.40 EPS) in the quarter topped consensus estimates by $0.27 per share.
Given uncertainty in the commercial aerospace markets around the pandemic, the company still isn’t offering financial guidance for the year. However, Raytheon Technologies Greg Hayes said during an earnings call with analysts that it will be at least until 2023 before commercial air traffic returns to 2019 levels.
Internal costs associated with COVID-19, such as the purchase of personal protective equipment, facility cleaning, employee temperature scanning, and higher freight costs are expected to clip another $0.08 EPS from the bottom line in the second half of the year, bringing the total costs to $0.16 EPS for the year, more than expected, Anthony “Toby” O’Brien, chief financial officer of Raytheon Technologies, said on the call.
The company continues to expect growth in its defense business for the next several years due to a strong backlog and continued strong orders, O’Brien said.
Overall backlog at the end of the quarter was $158.7 billion, with $73.1 billion from defense, a record.
