Doug Harned

Doug Harned asked about the company's 2026 revenue growth guidance, adjusted for pass-through revenue, and how it aligns with end market growth. He also inquired about the significance of supply chain constraints on parts and the timeline for potential relief to boost growth.

Answer

Russell Ford, Chairman and CEO, explained that StandardAero's commercial market throughput capacity exceeds current supply chain support, indicating potential for disproportionate market share growth, especially in business aviation. He noted that while the supply chain is improving, it's still a constraint, with depth of delay coming down, but on-time delivery is not expected to return to 90%+ levels within the next 12 months.

Doug Harned asked about StandardAero's end market revenue growth assumptions, specifically how the adjusted 10%+ growth for 2026 aligns with end market views and whether the company expects to grow in sync, higher, or lower. He also inquired about the significance of supply chain constraints for parts and the timeline for relief to support increased growth.

Answer

Russell Ford (Chairman and CEO) indicated that StandardAero's commercial market throughput capacity exceeds current supply chain support, suggesting revenue upside and potential for disproportionate market share growth, especially in business aviation. He confirmed that the supply chain remains a constraint, with on-time delivery improving from last summer's lows (60% range) due to decreasing 'depth of delay,' but does not expect a return to 90%+ on-time deliveries within the next 12 months.

Doug Harned asked about Howmet's evolving strategy for Engine Products over the next five years, contrasting expectations for growth across commercial aerospace, defense, and gas turbines. He also inquired if the record 34% EBITDA margin for Engine Products was nearing a ceiling and what factors contributed to these higher margins.

Answer

Executive Chairman and CEO John Plant explained that his thinking has evolved, with commercial aerospace growth remaining robust due to extraordinary backlogs and significant investments in new manufacturing plants. Defense demand is solid, with F-35 as a flagship and emerging segments like missiles and drones. The biggest change is in the gas turbine market, which is now seen as less cyclical with consistent product management and strong demand for electricity, especially for data centers. This has led to increased capital deployment and new plant construction. Regarding margins, Mr. Plant stated he is unwilling to predict future margins, citing additional costs from recruiting 1,500 new employees, training, and the need for yield improvements, though he sees potential for margin impetus from moving to flow-style production in gas turbines by the end of the decade.

Doug Harned asked about Howmet's evolving strategic thinking for engine products over the next five years, contrasting expectations for commercial aerospace, defense, and gas turbines regarding planning and investments. He also inquired about the sustainability of the Engine Products segment's record 34% EBITDA margin and the factors enabling these higher margins.

Answer

Executive Chairman and CEO John Plant explained that his thinking has evolved, with commercial aerospace showing robust, continuing growth and a record OEM backlog. Defense demand remains solid, with F-35 as a flagship and emerging segments like missiles and drones. The biggest change is in the gas turbine market, now seen as a long-term growth area driven by data centers, leading to significant capital investments in new plants and equipment. Regarding margins, Mr. Plant stated he doesn't predict future margins but acknowledged the current strong performance, noting challenges like recruiting and training over 1,500 new employees in the engine segment for 2026 and the long-term goal of transitioning gas turbine production from batch to flow.

Doug Harned from Bernstein questioned the low margins at Newport News despite strong Q4 revenue growth, asking how individual programs are positioned to improve margins towards long-term goals, especially considering negative EACs on the CVN program. He also inquired if additional funding for the industrial base is still needed beyond the significant 2026 budget support, to further enable throughput and industrial base expansion.

Answer

Executive Vice President and CFO Tom Stiehle explained that Newport News' margins are impacted by pre-COVID ships with schedule and inefficiency issues, expecting improvement as the portfolio shifts to post-COVID ships by 2027, aided by wage adjustments and contract definitizations. President and CEO Chris Kastner affirmed the need for more capital and incentives to ramp throughput and expand distributed shipbuilding, welcoming continued investment opportunities.

Doug Harned inquired about Newport News' Q4 revenue growth but persistently low margins, specifically addressing negative EACs on the CVN program and how individual programs plan to improve margins long-term. He also asked if current industrial base funding is sufficient or if more is needed, especially with potential 2027 budget additions.

Answer

EVP and CFO Tom Stiehle explained that Newport News' EACs are stable, and booking rates will improve as pre-COVID ships cycle out, with the portfolio becoming more post-COVID by 2027. He cited wages, contract adjustments, and change management REAs as drivers for improvement, noting that material growth currently impacts advanced procurement contracts with margin restrictions. President and CEO Christopher Kastner added that more capital is required for throughput, with HII seeking to partner with the Navy and expand distributed shipbuilding. Tom Stiehle further emphasized that the funding is flowing, evidenced by double-digit shipbuilding growth, increased outsourcing, and a conservative 6% growth guide.

Doug Harned sought to understand L3Harris's Space production plans, specifically the ramps in Palm Bay and Fort Wayne. He also asked how the company views the competitive and industrial evolution of the Tracking Layer over time, and its connection to the new facilities.

Answer

CEO Chris Kubasik highlighted the customer's focus on speed and scale, noting L3Harris's investment in over 200,000 sq ft of facilities in Fort Wayne and Palm Bay to quickly produce satellites and meet schedules. He acknowledged supply chain challenges across the industry but expressed confidence in increased revenue from these factories, anticipating the HBTSS award and growth in classified work under Golden Dome. He emphasized L3Harris's strategic advantage in having made these investments years ago, positioning it for current growth.

Doug Harned sought to understand L3Harris's space production plans, specifically the ramps in Palm Bay and Fort Wayne, and how this fits into the broader space business and the competitive evolution of the Tracking Layer, given multiple peers on Tranche 3.

Answer

CEO Chris Kubasik highlighted the focus on speed and scale, citing over 200,000 sq ft of investment in Fort Wayne and Palm Bay to quickly turn satellites and meet schedules. He acknowledged supply chain challenges across the industry but emphasized L3Harris's capacity and readiness for increased revenue, anticipating HBTSS awards and classified work under Golden Dome. He believes L3Harris's early investments position it well for growth.

Doug Harned questioned Lockheed Martin's confidence in the 7-year PAC-3 and THAAD production ramp, considering the historical reliance on annual congressional appropriations, and whether similar multi-year opportunities exist for other MFC programs.

Answer

Jim Taiclet, Chairman, President, and CEO, explained that congressional authorization for 7-year effector programs, including THAAD and PAC-3, provides initial confidence. He also highlighted that the framework agreements include 'make-whole' provisions to protect the company's ROI if procurement strategies change during the seven-year period.

Doug Harned asked about Lockheed Martin's confidence in the seven-year PAC-3 and THAAD missile ramp given traditional annual appropriations, and whether similar multi-year opportunities exist for other Missiles and Fire Control (MFC) programs.

Answer

Jim Taiclet, Chairman, President and CEO, expressed confidence, noting that the administration is working to modify annual appropriations for specific missile systems, including THAAD and PAC-3, on a seven-year basis. He also highlighted make-whole provisions in the framework agreements that protect Lockheed Martin's ROI if procurement strategies change, and indicated potential for similar deals on other MFC programs.

Doug Harned sought clarity on the primary bottlenecks and challenges anticipated in Boeing's planned production rate ramps for the 737 (moving to 47-52 per month) and 787 (moving to 10, 12, and 14 per month), specifically addressing potential issues with Spirit AeroSystems.

Answer

Kelly Ortberg, Boeing's President and Chief Executive Officer, and Jay Malave, Boeing's Executive Vice President and Chief Financial Officer, explained that the 737 ramp to 42 per month went well with good KPIs. The move from 42 to 47 is not expected to have major supply chain issues due to inventory, but 47 to 52 will require improved supply chain performance. They highlighted the Spirit AeroSystems acquisition as crucial for guiding capacity growth and mitigating risk. For the 787, stabilization at rate 8 is progressing, with a plan to reach rate 10 next year, noting seat issues primarily affect deliveries, not production output. Capital investments are in place for new 737 and 787 lines to support higher future rates.

Doug Harned inquired about potential bottlenecks in production ramps for the 737 (targeting 47-52 per month) and 787 (targeting 10, 12, and 14 per month), specifically addressing Spirit AeroSystems' role.

Answer

Kelly Ortberg, CEO, and Brian West, EVP and Chief Financial Officer, explained that the 737 ramp to 42 per month went well, with the supply chain not a major issue for the 42-47 ramp due to inventory. The 47-52 ramp will require improved supply chain performance, including Spirit AeroSystems, where the acquisition aims to guide capacity growth. For the 787, stabilizing at rate 8 and moving to 10 is planned, with seat issues being a delivery constraint, not a production bottleneck. Investments in new production lines for both programs are underway.

Doug Harned inquired about the investment in the Charleston facility for 787 production, specifically what is needed to increase rates to 12-14 per month, whether current investments are for rate 10 or higher, and the projected CapEx trajectory.

Answer

President and CEO Dave Calhoun confirmed that Boeing is already making steps for higher rates, beyond 10 per month. He stated that the company plans to double the manufacturing footprint in Charleston, which is necessary for rates higher than 10, with full utilization expected around 2028. He indicated that CapEx related to this expansion, as well as growth in St. Louis, is expected to increase in 2026.

Doug Harned asked about the longer-term margin trajectory for Pratt & Whitney, considering the positive impact of increasing V2500 work scope and life extensions, balanced against potential negative effects from declining GTF AOGs (e.g., PW-1100 powered airplanes leading to V2500 parking) and a declining spare engine ratio.

Answer

Chris Calio, Chairman and CEO of RTX, confirmed continued strength in V2500 shop visits (around 800) and content, with low retirements. He noted that while OE deliveries present a margin headwind, the key to Pratt's margin trajectory is growing GTF aftermarket profitability through durability improvements (some implemented in 2025), the GTF Advantage engine (EU certified, EIS later 2026), and the hot section plus retrofit package for MRO. Neil Mitchill, CFO, added that the GTF fleet size now exceeds the V2500 fleet, compensating for future V2500 retirements, and continued demand for spare engines will provide a steady revenue and profit stream.

Doug Harned asked about the longer-term margin trajectory for Pratt & Whitney, considering the interplay of declining GTF AOGs, increasing V2500 work scope and life extensions, potential parking of V2500-powered airplanes due to PW-1100 issues, and a decline in the spare engine ratio.

Answer

Chairman and CEO Chris Calio affirmed continued strength in V2500 shop visits (around 800) and content. He emphasized that GTF aftermarket profitability, driven by durability improvements, GTF Advantage engine EIS, and the Hot Section Plus retrofit package, will be key to increasing Pratt's margins. CFO Neil Mitchill added that the growing GTF fleet, now larger than the V2500 fleet, will overcome lost revenues from V2500 retirements, and continued demand for spare engines will provide a steady revenue and profit stream.

Doug Harned asked about Raytheon's margins, which surpassed the 12% level, and whether the company sees further upside from higher volumes, increased international mix, and mature fixed-price work, or if they are already at their desired margin level.

Answer

CEO and Chairman Chris Calio expressed satisfaction with Raytheon's performance, highlighting the growing international backlog (44%) and the composition of orders in core capabilities as positive tailwinds. He stated that potential for further upside is contingent on continued supply chain health, deconflicting suppliers, and bringing new suppliers to meet higher production rates.

Doug Harned asked about Raytheon's margins, which exceeded 12% this quarter, and whether there is further upside from higher volumes, international mix, and mature fixed-price work in the coming years.

Answer

CEO Chris Calio expressed satisfaction with Raytheon's position, highlighting strong demand and the growing international portion of the backlog (44%). He mentioned potential additions to the backlog from munitions replenishment. He emphasized that future upside hinges on supply chain health (deconflicting suppliers, bringing in new ones) to meet higher production rates, rather than demand or backlog composition.

Doug Harnett observed that the mix of business jet deliveries has been stable over the last two years, contrary to an expected shift towards Latitude and Longitude, and asked if this mix is constrained by demand or capacity. He also inquired about any shifts in demand mix between corporate and high-net-worth individuals over the past nine months, despite the dynamic economic outlook.

Answer

Scott Donnelly, Chairman, President, and CEO, clarified that the delivery mix is currently more of a capacity issue, as end-market demand remains stable across the entire product portfolio. He noted that new product launches, such as the CJ4 Gen 2 and Ascend, often create spikes in order activity, extending lead times. Mr. Donnelly also remarked on the remarkable stability of demand across all segments (corporate and high-net-worth) despite economic noise, attributing it partly to long lead times that encourage customers to look beyond current market fluctuations.

Doug Harnett asked about the stable mix of business jet deliveries, inquiring if it's constrained by demand or capacity, and how the demand mix (corporate vs. high net worth) has shifted from the beginning of the year given the dynamic economic outlook.

Answer

Scott Donnelly, Chairman, President, and CEO of Textron, indicated that the delivery mix is primarily a capacity issue, with steady end-market demand across all products, often influenced by new product launches. He noted remarkable stability in demand across segments despite economic noise, attributing it to long lead times that encourage buyers to look beyond immediate market conditions.

Doug Harned asked for an update on the Sentinel program, its restructuring process, how the delayed IOC affects production timing, any ties to Northrop Grumman's performance, and potential opportunities for expanded work scope. He also inquired about the allocation of new money in the 2026 budget for Sentinel.

Answer

Kathy Warden, Chair, CEO, and President, stated that Northrop Grumman is partnering with the Air Force on an execution framework for the Sentinel program's restructure, noting positive impacts from decisions like creating new silos. She mentioned establishing a new program baseline will define production timing. She highlighted recent progress, including the full-scale qualification test of the stage two solid rocket motor and completion of the critical design review for the launch support system. For 2026 funding, she expects it to support both government entities (e.g., Army Corps of Engineers) and the industry team.

Doug Harned questioned the confidence in the LEAP services margin outlook for 2028, particularly given the early stage of PRSVs and understanding full shop visit costs, and how price and cost factors contribute to this trajectory.

Answer

Larry Culp, Chairman and CEO, and Rahul Ghai, CFO, expressed confidence in the LEAP margin roadmap to 2028, citing ongoing field performance improvements, FLIGHT DECK operational enhancements, better material availability, supply base advancements, and the impact of the LEAP-1A durability kit. They highlighted expected continued 30% year-over-year internal shop visit growth, a doubling of external channel activity, and investments in repair technology to reduce costs.

Doug Harned asked for confidence drivers behind GE Aerospace's projected LEAP services margin improvement to overall services margins by 2028, considering the early stages of PRSVs and understanding full shop visit costs, and how price and cost factors contribute.

Answer

Chairman and CEO Larry Culp stated that the roadmap to 2028 is managed daily, combining field performance and FlightDeck operational improvements in material availability and cost reductions. CFO Rahul Ghai added that continued 30% year-over-year internal shop visit growth, external channel expansion, and investments in repair technology, alongside durability kit introductions, provide confidence in the LEAP trajectory.