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RTX to sell cyber, intelligence biz for $1.3B amid Q3 slump

Pratt & Whitney division reports nearly $1B loss

//October 24, 2023//

Arlington County-based RTX, formerly Raytheon Technologies Corp., unveiled its new name and logo at the Paris Air Show June 19 2023.

Arlington County-based RTX, formerly Raytheon Technologies Corp., unveiled its new name and logo at the Paris Air Show June 19 2023.

Arlington County-based RTX, formerly Raytheon Technologies Corp., unveiled its new name and logo at the Paris Air Show June 19 2023.

Arlington County-based RTX, formerly Raytheon Technologies Corp., unveiled its new name and logo at the Paris Air Show June 19 2023.

RTX to sell cyber, intelligence biz for $1.3B amid Q3 slump

Pratt & Whitney division reports nearly $1B loss

// October 24, 2023//

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RTX has agreed to sell its cybersecurity, intelligence and services business segment for about $1.3 billion and announced a $10 billion stock buyback program Tuesday as it seeks to recover from a manufacturing quality issue in a jetliner engine that has plagued the Arlington County-based Fortune 500 defense and aerospace contractor since the summer.

RTX, which announced its rebranding from Raytheon Technologies Corp. in June, revealed its plans in its third quarter 2023 results, which also included news of a nearly $1 billion loss in its East Hartford, Connecticut-based Pratt & Whitney aerospace division. The buyer for the cybersecurity, intelligence and services business, part of its Raytheon division, was not disclosed. The sale is subject to regulatory approval.

“We regularly review our portfolio to ensure our business is best positioned to deliver for our customers, stakeholders and employees,” company spokesperson Chris Johnson told Virginia Business. “Based on that review, we decided to divest our cybersecurity, intelligence and services business. We believe this gives the business greater autonomy to deliver on customer missions and allows it to serve as a platform for innovation well into the future.”

For the quarter, RTX reported a loss of $985 million, the result of a powder metal defect that could cause engine parts to crack and will require the grounding of 350 jets per year through 2026, Reuters reported in September. RTX lost about $5.4 billion in sales for the third quarter.

In July, when RTX disclosed the defect, officials said they expected to complete repairs in 60 days; Reuters’ September report shows a more prolonged and serious process, with as many as 650 jets grounded in the first half of 2024.

“We have made significant progress on our assessment of the Pratt & Whitney powder metal manufacturing matter and expect the financial impact to be in line with the previously disclosed charge,” RTX Chairman and CEO Greg Hayes said in a statement. “We are now focused on executing on our fleet management plans and are working relentlessly to mitigate further disruption to our customers. We do not expect any significant future incremental impact as a result of these fleet management plans.”

The company reported third quarter sales of $13.5 billion, down 21% from the previous year, which it attributed to the powder metal issue. Its adjusted sales of $19 billion for the quarter reflected a 12% increase from the prior year and the company has a $190 billion backlog, including $115 billion in commercial and $75 billion in defense work.

“The historic demand across our commercial aerospace and defense businesses drove 12% organic sales growth during the third quarter and led to another record backlog of $190 billion,” Hayes said.

The company’s $10 billion share buyback program will take advantage of steep declines in RTX share prices this year. RTX shares hit a high of $104 on April 18, with a steep decline to $85.17 on July 27 following news of the powder issue before declining through September and bottoming out at $69.38 on Oct. 5. With news of the buyback, RTX’s stocks increased to $77.99 by late Tuesday afternoon.

In addition, Gov. Glenn Youngkin on Tuesday announced RTX is donating $1 million to New York-based NAF, a national nonprofit organization that links businesses and schools to help high school students to prepare for college and work, to help with STEM education in support of the governor’s $100 million laboratory school initiative.

“Private sector leadership is critical to bringing innovation to Virginia public schools, and I am grateful for RTX’s donation to NAF to support STEM in Virginia schools,” Youngkin said in a statement. “Our lab school initiative is focused on creating pathways to the most in demand careers, technical training, and STEM exposure for Virginia students. The Virginia Department of Education will work closely with NAF on a plan to support lab school and STEM development in Virginia public schools.”

The state approved its first lab school, a partnership between Virginia Commonwealth University and Richmond’s CodeRVA Regional High School in July. That program, called VCU x CodeRVA Lab School, will train teachers and its students will focus on computer science. An additional six lab school application have so far been submitted, Youngkin’s office said in a news release Tuesday, and many or those applications are using STEM learning models to meet workforce needs in the state.

RTX has spent more than $17.6 million at Virginia educational institutions through a program that pays for employees to earn college degrees and certifications, resulting in more than 700 degrees. More than 200 RTX employees are currently attending Virginia-based programs through the benefit.

“The future of aerospace and defense innovation will be defined by the young people in Virginia schools and beyond,” Hayes said. “Our partnership with the state and NAF will deliver career-themed curriculum through academies of engineering and related business disciplines in public high schools right here in the commonwealth.”

RTX announced its move to Arlington County, from Massachusetts, in June 2022. The company employs more than 180,000 people globally.

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