We have recently compiled a list of the The 11 worst aviation stocks to buy according to analysts. In this article, we will analyze the position of RTX Corporation (NYSE:RTX) compared to other aviation stocks.
The aviation industry has been one of the most important market segments in the 20th and 21st centuries. The future of aviation is closely linked to the broader landscape of mobility, which is important for economic growth, social connectivity, and access to services such as commerce, healthcare, and education.
According to the International Air Transport Association (IATA), the airline industry has rebounded strongly from the COVID-19 crisis, with global traffic surpassing pre-pandemic levels in February 2024. Domestic travel was the first to recover, reaching pre-COVID levels in spring 2023, while international travel followed more recently.
However, the global network has changed since 2019. International travel from China recovered slowly due to late easing of restrictions, economic uncertainties and geopolitical issues. On the other hand, domestic travel in China reached record levels, driven by domestic tourism. Routes between Asia and Europe continue to be affected by the war in Ukraine.
Most regions are expected to surpass 2019 traffic levels by 2024, with global passenger numbers projected to grow 10.4% year-over-year.
The report notes that Asia Pacific is the fastest-growing region, projected to account for more than half of global passenger growth by 2043 and led by India and China. Despite risks such as geopolitical conflicts and climate policies, improving economic conditions may boost demand.
Air connectivity, one of the main drivers of global economic growth, is forecast to reach a record high in 2024, with more than 22,000 unique city pairs, thanks to falling ticket fares. Meanwhile, air cargo demand has recovered, driven by e-commerce and maritime transport disruptions. Global capacity is expected to increase further, although cargo load factor is likely to decline as capacity outstrips demand.
Use of AI in industry
Like most industries today, airlines are also implementing AI to improve the efficiency of their operations. According to an August report by CNBC, these companies are using AI for tasks such as ground control, customer service, and flight route optimization.
American Airlines has introduced its AI-powered “smart gate” system at its Dallas-Fort Worth control center. The tool automatically assigns gates to incoming flights, reducing taxi time by about 20%, or two minutes per flight, at five airports. The system also helps passengers, baggage and crews make faster connections, improving overall efficiency.
Alaska is using AI to optimize flight routes and aircraft stopover times at gates. Its tool is described as “Waze for the skies,” and it uses AI to plan faster routes, saving fuel and reducing delays. Additionally, the system monitors ground operations, tracking when fuel, catering, and baggage trucks arrive and depart, allowing agents to address delays immediately.
United has implemented generative AI for customer service, especially during flight disruptions. AI generates detailed and empathetic messages explaining delays, which has increased customer satisfaction by 4% since its implementation on 6,000 flights.
Despite these advances, airlines said AI is not replacing jobs, but rather improving operational efficiency. AI tools allow airlines to improve areas where humans may struggle to handle complex tasks as efficiently. These things, like reducing flight delays or shaving minutes off response times, are intended to improve overall service without completely automating operations.
Our methodology
For this article, we used stock and ETF screeners to identify 65 companies with a market capitalization greater than $50 million that have significant operations in the aviation industry. We narrowed our list to 11 companies where fewer than 50% of the analysts who have covered the stock have Buy-equivalent ratings. We also omitted stocks with an average analyst upside price target greater than 15%. Stocks are listed in descending order of their average analyst upside price target.
We’ve also added hedge fund sentiment around each stock, which is pulled from our database of over 900 elite hedge funds. Why do we care about the stocks that hedge funds are piling into? The reason is simple: Our research has shown that we can beat the market by mimicking the best stock picks from the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming its benchmark by 150 percentage points (See more details here).
An aerial view of a commercial airliner in flight, with its fuselage shining in the sun.
RTX Corporation (NYSE:RTX)
Average analyst target price on the upside as of September 16: 1.51%
Number of hedge fund holders: 54
RTX Corporation (NYSE:RTX), formerly known as Raytheon Technologies Corporation, is a leading name in the aerospace and defense industries and is headquartered in Virginia. It is one of the world’s leading aerospace manufacturers and defense contractors, known for its broad portfolio that includes advanced aircraft engines, avionics, and aerostructures. The company’s aviation segment has two subsidiaries, Pratt & Whitney and Collins Aerospace.
Pratt & Whitney is known for its aircraft engines and gas turbines, which power a wide range of commercial and military aircraft. Its innovative approach has made it a major player in both the civil and defense aviation markets, offering engines that are essential for the latest advances in air transportation.
Collins Aerospace focuses on the development and manufacturing of aerospace systems that enhance the performance, safety and efficiency of a variety of aircraft. The subsidiary is prominent in the supply of advanced avionics, air traffic management systems and other important technologies that support both military and commercial aviation. Collins Aerospace also plays a significant role in space exploration, contributing to international space programs with its high-tech solutions.
RTX (NYSE:RTX) shares were held by 54 hedge funds in the second quarter, worth a combined $2.8 billion. Fisher Asset Management is the company’s largest shareholder with 17.619 billion shares worth nearly $1.77 billion, as of June 30.
While several analysts are bullish on RTX (NYSE:RTX) stock, many are still a bit bearish. Among 25 analysts, 17 maintain a Hold or lower rating on the company. The average price target of $121 represents a mere 1.51% upside for the company’s stock as of Sept. 16.
RTX overall is ranked 8th on our list of the worst aviation stocks to buy. While we recognize RTX’s potential as an investment, our conviction lies in the belief that AI stocks hold more promise for generating higher returns and doing so in a shorter time frame. If you’re looking for an AI stock that holds more promise than RTX but is trading at less than 5x earnings, check out our report on the stock. The cheapest AI stocks.
Read next: $30 Trillion Opportunity: Top 15 Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer says NVIDIA has become a “wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
