Last update on 2024-06-07

Raytheon Technologies (RTX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyze Raytheon Technologies' 2023 financial health through its Piotroski F-Score of 5/9, examining profitability, liquidity, and operating efficiency insights.

Short Analysis - Piotroski Score: 5

We're running Raytheon Technologies (RTX) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a method to gauge the strength of a company's financial position using 9 distinct criteria. Raytheon Technologies (RTX) scored 5 out of 9 on this scale. Out of these, it performed well in profitability indicators like having a positive net income ($3.195 billion) and cash flow from operations ($7.883 billion). However, it struggles with declining ROA (Return on Assets) and gross margin, and an increase in leverage. Overall, liquidity is mildly concerning with a reducing current ratio, but a reduction in outstanding shares and a better asset turnover is a positive sign.

Insights for Value Investors Seeking Stable Income

Raytheon Technologies (RTX) exhibits mixed signals according to the Piotroski F-Score, with strength in profitability but concerns in leverage and gross margin. Investors might find value in its consistent positive cash flow and stock buybacks, but should consider the declining ROA and increasing leverage. It might be worth a closer look for those who weigh profitability and operational efficiency more heavily. Investors should approach with caution and consider in-depth analysis into the areas of concern.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Raytheon Technologies (RTX)

Company has a positive net income?

The criterion evaluates whether the net income for Raytheon Technologies in 2023 is positive or negative. It's a fundamental indicator of profitability.

The net income for Raytheon Technologies (RTX) in 2023 is $3,195,000,000, which is positive. This is a robust indicator of the company's profitability for the year. Reflecting upon the historical data, RTX has consistently posted positive net income over most of the last 20 years, except in 2020, where it posted a net loss of approximately $3,519,000,000. Despite the significant negative impact in 2020, the company’s return to a positive net income in subsequent years demonstrates resilience and recovery. Thus, for 2023, RTX scores 1 point for having a positive net income.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a key indicator of a company's financial health and its ability to generate cash from its core business operations.

For Raytheon Technologies (RTX), the Cash Flow from Operations (CFO) in 2023 was $7,883,000,000, which is positive. This indicates that the company is generating sufficient cash flow from its operating activities to sustain and grow its business. Historical data shows that the company has consistently maintained a positive CFO over the past 20 years, with a noticeable upward trend from 2003's CFO of $2,875,000,000 to the latest figure. This consistent growth is a positive sign, illustrating the company's robust operational efficiency and its ability to manage its cash flow effectively.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) measures a company's efficiency in generating profit from its assets over time.

Raytheon Technologies (RTX) experienced a decline in ROA from 0.0325 in 2022 to 0.0199 in 2023. This indicates a deteriorating efficiency in asset utilization, as the company generated lower returns from its assets in 2023 compared to the previous year. Hence, for the Piotroski criterion, RTX scores 0 for this metric in 2023. Upon examination of the historical ROA performance over the past 20 years, a fluctuating trend is evident. The company's ROA had peak efficiency around 2014 (0.2484 as the industry median, not individual company). Nonetheless, despite numerous challenges, RTX's current underperformance relative to its history and industry median suggests that renewed strategic efforts are necessary to optimize asset utilization.

Operating Cashflow are higher than Netincome?

This criterion evaluates whether the company generates more cash flow from operations than its reported net income. Strong operational cash flow can indicate robust cash generation ability.

Raytheon Technologies (RTX) has an operating cash flow of $7.883 billion in 2023, significantly exceeding its net income of $3.195 billion for the same year. This results in a point being added for this criterion. High operating cash flow relative to net income indicates efficient and robust operational performance, ensuring that the company is not overly reliant on accounting adjustments or potentially manipulable net income figures. Historically, RTX has consistently generated solid cash flows, underlining the firm's operational stability. Thus, this trend is favorable.

Liquidity of Raytheon Technologies (RTX)

Leverage is declining?

Change in leverage assesses the company's capability to manage its debt relative to its equity. A reduction is a positive indication of financial health.

In 2023, Raytheon Technologies (RTX) exhibited an increase in leverage to 0.2704 from 0.2032 in 2022. This 33% uptick represents a shift towards a higher-debt profile, reducing its Piotroski score by 1 point this year. Over the last 20 years, RTX's leverage fluctuated, peaking in 2018 at 0.3069, meaning this increase isn't unprecedented but still signals a potential risk in debt management.

Current Ratio is growing?

The current ratio compares a company's current assets to its current liabilities, indicating its short-term liquidity.

In 2023, Raytheon Technologies (RTX) reported a current ratio of 1.0354, down from 1.0851 in 2022. This suggests a decrease in the company's short-term liquidity. While the current ratio remains above 1, indicating the company can still cover its short-term liabilities, the downward trend might raise concerns among investors. Over the past two decades, RTX's current ratio shows fluctuation, and the 2023 value is notably below the industry median of 2.1805.

Number of shares not diluted?

Change in Shares Outstanding indicates if a company is issuing more shares or buying them back. A decrease in shares is considered a good indicator for investors as it suggests the company is focused on maximizing shareholder value by buying back stock.

A review of Raytheon Technologies' (RTX) outstanding shares reveals that they decreased from 1,475,500,000 in 2022 to 1,426,000,000 in 2023. This reduction in outstanding shares amounts to an approximately 3.4% decline year over year. This trend is positive as it indicates the company is executing stock buybacks, thereby returning capital to shareholders and potentially improving its earnings per share (EPS). Over the past two decades, there have been fluctuations in the number of shares, particularly a notable spike in 2020 due to the merger with United Technologies. However, the recent decrease fits a longer-term trend of reducing outstanding shares, which is generally viewed favorably in capital markets.

Operating of Raytheon Technologies (RTX)

Cross Margin is growing?

Change in Gross Margin compares the growth or decline of profit margins after accounting for the cost of goods sold. It's a critical measure of operational efficiency.

Raytheon Technologies (RTX) reported a Gross Margin of 0.1754 in 2023, a decrease from 0.2038 in 2022. This decline indicates that operational efficiency has been impacted negatively. Industry benchmarks show the industry median gross margin was 0.2526 in 2022 and 0.2484 in 2023, highlighting that RTX is underperforming relative to its peers. Historically, RTX’s gross margins have mostly been above industry medians but fell sharply in recent years. This trend scores a 0 in Piotroski Analysis, signaling decreased competitive performance.

Asset Turnover Ratio is growing?

Asset Turnover ratio reveals how efficiently a company utilizes its assets to generate sales. This measure is crucial as it indicates the effectiveness of the firm's asset management strategies.

The Asset Turnover for Raytheon Technologies (RTX) has risen from 0.4189 in 2022 to 0.4298 in 2023, indicating a positive improvement in asset utilization efficiency. This subtle increase of 0.0109, although modest, is encouraging, especially considering the 20-year historical data which shows fluctuations and downward trends post-2008 financial crisis, with recent improvements since 2020. Consequently, we add 1 point for this criterion as this trend showcases better use of assets to drive sales, which is favorable for stakeholders and potential investors.