Will This Blatant Overreaction Continue?
Tomorrow morning, before the open of trading, RTX (RTX) will release its latest earnings report.
Here are the two possible scenarios…
If the stock moves lower, it could extend one of the most blatant overreactions occurring on Wall Street right now.
But if it moves higher, it has the potential to trigger a turnaround that could last the entire 2024 trading year.
Either way, tomorrow’s earnings report could open up instant profit opportunities for you.
Here’s a rundown of this entire situation…
As I’m sure you know, Karim and I agree that RTX is one of the best defense and aerospace values you can buy.
The stock has been under pressure lately due to a problem with the geared turbofan engine made by its Pratt & Whitney subsidiary. The defect forced hundreds of engines to be remediated before their regularly scheduled maintenance.
This could cost RTX $3.5 billion over the next two years, which has triggered a litany of downgrades and cost the stock $35 billion in market cap.
That’s 10X the cost of fixing the issue. Talk about an overreaction!
Pratt’s commercial engines will account for less than 10% of RTX’s profits this year, while RTX’s strongest revenue center – its missile division – stands to generate one-third of the profits for its defense business.
As I just argued in my “2024 Predictions and Forecast” presentation, missiles are the #1 area of the defense budget that needs rapid upgrades and a massive increase in production.
To put it all in perspective…
The Pratt military business accounts for around $7 billion of RTX’s $73 billion in profits. One small segment of RTX’s operation costing it $35 billion in market cap is a gross overreaction – which is why we feel RTX represents a tremendous value at these levels.
YOUR ACTION PLAN
No matter what happens, I’ll soon be executing a trading strategy inside The War Room that could help you profit no matter which way the stock moves.
Are you not yet a member of The War Room?
Well, I have good news…
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The War Room Fast Pass.
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More details to come.
MONDAY MARKET MINUTE
- Can the Record Highs Last? Last Friday, the S&P 500 closed at a record high. Can the good times last? That’ll be what the major market averages will try to sort out this week, and the answer could be based primarily on earnings. See below for a list of more companies that will be reporting earnings this week.
- Goldman Sachs Starts Strong. Now that the banking giant has decided to move away from retail banking, it is refocusing on what it’s truly good at: trading and investment banking. After a lull for mergers and acquisitions in 2023, Goldman stands to benefit if they get kick-started again in 2024. Having reported earnings of $5.48 per share last Tuesday (which beat the estimate of $3.62), the company might already be on its way toward a better year.
- More Companies Reporting in the Days Ahead. Companies posting earnings this week include NFLX, TSLA, INTC and VZ. With earnings season now in full swing, I’ll be looking to make trades that capitalize on overnight earnings moves. Click here to learn more about Overnight Trades in The War Room.
- U.S. Goes Back to Drilling. Energy is in an interesting spot right now. We are drilling more than EVER (which is a surprise), oil prices have stayed low despite the current geopolitical tensions and the public’s souring on EVs could also be boosting demand. There will be lots more to unpack here in the months ahead.