RTX To Incur $3B Pre-Tax Charge In Q3 Due To Pratt & Whitney Engine Problem; Stock Slides

RTX Corp RTX provided an update on the impact to the Pratt & Whitney GTF fleet (PW1100 GTF engines, which power the A320neo) arising from the previously disclosed rare condition in powder metal used to manufacture certain engine parts.

RTX's pre-tax operating profit impact is estimated to be between $3 billion and $3.5 billion over the next several years, inclusive of an approximately $3 billion pre-tax charge in Q3, after partners' share of charges.

About 600 to 700 engines will be removed for shop visits between 2023 and 2026 beyond Pratt & Whitney's shop visit forecast entering 2023.

A majority of the incremental engine removals required by the fleet management plan will occur in 2023 and early 2024. The removals will result in higher aircraft on ground.

Also Read: RTX & Elbit JV Bags $16M Contract For Improved Pilot Helmet Mounted Display Systems

The company slashed its FY23 sales outlook from $73 billion - $74 billion to $67.5 billion - $68.5 billion versus an estimate of $73.6 billion. The company confirmed Adjusted EPS outlook of $4.95 - $5.05 against the consensus estimate of $5.01.

RTX updated its 2025 free cash flow commitment to reflect estimated impact of Pratt & Whitney powder metal matter. It now expects cash impact of approximately $1.5 billion during 2025, resulting in estimated RTX 2025 free cash flow of $7.5 billion.

RTX remains confident in its ability to return $33 - $35 billion in capital to its shareowners from the merger through 2025.

Related: Despite Pratt's Engine Issue, RTX Still Well-Positioned For Market Recovery: Analyst

Price Action: RTX shares are trading lower by 4.17% at $80 in premarket on the last check Monday.