Raytheon’s Surprise CFO Change Didn’t Bother Investors. Here’s Why.
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Raytheon Chief Financial Officer Toby O’Brien stepped down after the market closed on Friday.
Mario Tama/Getty ImagesAerospace & defense giant Raytheon Technologies made a surprise announcement Friday evening. Chief Financial Officer Toby O’Brien stepped down. He is being replaced by Neil Mitchill.
An unexpected change can, sometimes, unnerve investors, but Raytheon (ticker: RTX) stock isn’t doing much. Shares are up 0.3% in early trading. The S&P 500 and Dow Jones Industrial Average are both down a little.
One reason investors aren’t troubled is that the company raised first-quarter earnings guidance. Things are looking good. Raytheon management had earlier guided to about 73 cents in earnings per share for the first quarter of 2021. Now they expect the company to earn about 87 or 90 cents a share.
That’s a positive for Raytheon stock, and for other aerospace-and-defense stocks, as the industry digs itself out of a deep hole left by Covid-19. Commercial-air travel in the U.S. this past Sunday was down about 36% compared with 2019 levels. Still, things are getting better. Traffic is up more than 1,600% from the brutal, pandemic-affected April 2020.
Management changes likes this aren’t generally seen as positive. Vertical Research Partners analyst Rob Stallard called the timing “less than ideal” in a Monday research note. “In our experience, companies rarely reveal the whole story of an executive change, and we doubt if there will be much if any additional information on what prompted this move,” added the analyst. “However, in the bigger scheme of things, we don’t see this CFO change as having a material impact on our investment thesis.”
He likes Raytheon stock, rating shares at Buy with a $102 target. Stallard’s peers feel similarly. About 70% of the analysts covering Raytheon stock have Buy ratings. The average Buy-rating ratio for stocks in the Dow is about 60%.
The timing of the change comes about a year after Raytheon completed its massive transformation. The predecessor company, United Technologies, spun out elevator maker Otis Worldwide (OTIS) as well as air-conditioning giant Carrier Global (CARR). Then the remaining operations of United Technologies merged with Raytheon and changed its name to Raytheon Technologies.
Even if the timing isn’t ideal, the choice doesn’t appear to be a controversial one. Mitchill has been at the company for years. He was appointed acting senior vice president and CFO of United Technologies in 2019, serving in that role until the merger with Raytheon was complete. For the past year, Mitchill was serving as corporate vice president of financial planning, analysis, and investor relations of Raytheon Technologies. Before that he also served as CFO of the company’s Pratt & Whitney jet-engine business.
Year to date, Raytheon stock is up about 9%, similar to the change in the overall market.
Write to Al Root at allen.root@dowjones.com