RTX Corporation Q3 FY2025 earnings call

• Delivered strong Q3 results with 13% organic sales growth year-over-year, double-digit growth in commercial OE, commercial aftermarket and defense. Adjusted segment operating profit up 19% year-over-year. Free cash flow was $4 billion. - Commercial aerospace: passenger air travel resilient, global RPKs on track for ~5% growth, positive OE production trends. - Commercial aftermarket strong with large installed base. - Defense well positioned with strong orders, book-to-bill 1.63, backlog $251 billion. - Strategic priorities: executing on commitments, innovating for future growth, leveraging RTX's breadth and scale.

Collins

• Sales in the quarter were $7.6 billion, up 8% on an adjusted basis and 11% organically, driven by strength across all 3 channels. Adjusted operating profit was $1.2 billion, up $98 million versus the prior year. Full year outlook: expects sales to grow mid-single digits year-over-year on an adjusted basis and high single digits organically, and operating profit growth between $325 million and $375 million versus 2024.

Pratt & Whitney

• Sales of $8.4 billion were up 16% on both an adjusted and organic basis. Adjusted operating profit of $751 million was up $154 million versus the prior year. Full year outlook: now expects sales to grow low to mid-teens on an adjusted and organic basis, and operating profit growth between $350 million and $400 million versus 2024.

Raytheon

• Sales of $7 billion in the quarter were up 10% on both an adjusted and organic basis. Adjusted operating profit of $859 million was up $198 million versus the prior year. Full year outlook: continues to expect sales to grow low single digits year-over-year on an adjusted basis and mid-single digits organically, and operating profit growth between $400 million and $450 million versus 2024.

• Raised full year adjusted sales outlook to $86.5 billion to $87 billion, up from prior range, translating to 8%-9% organic sales growth. - Increased adjusted earnings per share range to $6.10 to $6.20. - Free cash flow outlook remains $7 billion to $7.5 billion. - Q4 expects segment profit up ~10% year-over-year, excluding impact of tariffs and recent divestitures at Collins.

• Tariff-related headwinds: Collins saw about $90 million of headwind from year-over-year tariffs in the quarter, same as Pratt.

Q: This is probably for Neil. You've raised the aerospace OEM guidance for the year. So I was wondering if you could dive into the details below that. And probably in conjunction -- for Chris, probably I suppose, how confident are you in delivering those new LEAP engines to Airbus with regard to their target for the full year?

A: Thanks, Rob. Let me start on the guidance and then I'll hand it over to Chris. Again, really strong quarter here in the third quarter. And what we've done with our outlook is we've dropped through that goodness for the full year. Also taking up the top line, if I kind of focus that around the midpoint at the top line at the RTX level, we'll see about $1.6 billion increase. Commercial aftermarket is a large portion of that. Commercial OE is about $200 million there. I'd say that $50 million of that is coming from Collins. The rest of it is at Pratt & Whitney. And what we're seeing there is continued delivery strength on the Collins side, particularly as we get into the last quarter of the year here on increased rates on 737 and 787. And on the Pratt side, I'd attribute that to the engine mix. On the aftermarket side, a lot of that sits at Pratt & Whitney, about $1.1 billion of the $1.6 billion that we're talking about on the increase sits inside of Pratt & Whitney with the majority of that in the aftermarket. We had a really strong third quarter. As you heard Chris talk about, the increase in MRO output is driving GTF aftermarket. We're also seeing strong V2500 mix and heavy shop visits there. So again, letting that drop through for the full year and you'll see that both on the top and the bottom line. And then finally, there's a couple of hundred million dollars at Raytheon on the defense side. We've got 10 consecutive quarters here of material receipt growth and we're continuing to get ready for the delivery of that large backlog and a backlog we expect to continue to grow. So those are the big moving pieces on the top line. Of course, dropping through on the bottom line, you see the profit there. We've had some favorability on below-the-line items as well and we're letting that kind of come through as we stare at just 90 days to go.

Q: This is probably for Neil. You've raised the aerospace OEM guidance for the year. So I was wondering if you could dive into the details below that. And probably in conjunction -- for Chris, probably I suppose, how confident are you in delivering those new LEAP engines to Airbus with regard to their target for the full year?

A: Rob, I'll pick it up from there on the second part of your question on deliveries. I mean, overall, we feel pretty good about how we've executed this year and supported the production ramps for both the aircraft -- for all the aircraft OEMs. We're going to continue to work very closely with Airbus to make sure that they have what they need down the stretch of the year, while also continuing to balance the allocation of material as we've talked about before, because we've got to continue to support the fleet. So that's going to continue to be a focus. I'll remind folks that we're up over 50% versus our 2019 production levels. We've continued to ramp production pretty robustly. And again, going to work very closely with our airframe customers to make sure they have what they need so they can hit their deliveries for the end of the year.