Kristine Liwag

Kristine Liwag asked about the Missile Solutions business, specifically regarding the continuation of long-term agreements like PAC-3 and THAAD, the impact of the IPO plans with the U.S. government, and the potential for the business to grow 3x-5x larger or achieve double-digit growth in the next three to five years.

Answer

CEO Chris Kubasik confirmed that everything is tracking as discussed, noting Lockheed Martin's agreement on THAAD and L3Harris's role as the sole provider of propulsion and DAC systems. He highlighted plans for facilitization, building over 60 factories, and the upcoming Form S-1 filing for the IPO to provide more details on potential upside. CFO Ken Bedingfield added that L3Harris is working closely with customers on acceleration and scaling, modernizing production lines for THAAD and PAC-3, and expects the Missile Solutions business to grow at a double-digit CAGR for the foreseeable future.

Kristine Liwag inquired about the long-term agreements for the Missile Solutions business, specifically regarding PAC-3 and THAAD, and whether the IPO plans with the U.S. government satisfy these demands. She also asked about the potential for the business to grow 3-5x larger given strong demand.

Answer

CEO Chris Kubasik confirmed that agreements like those for THAAD and PAC-3 are tracking as expected, with L3Harris supporting Lockheed Martin. He noted significant upside potential with investments in new factories and equipment, and that the business is projected to achieve a double-digit CAGR for the foreseeable future. CFO Ken Bedingfield added that L3Harris is closely aligned with customers and the Department of War on acceleration and scaling, modernizing production lines for THAAD and PAC-3.

Kristine Liwag highlighted the 'schism' between strong demand signals and actual contract awards, asking what factors, such as the government shutdown, clarity on priorities, or supply chain visibility, need to change to close this gap and accelerate the book-to-bill environment.

Answer

Chairman and CEO Christopher Kubasik attributed the gap primarily to the government shutdown, which is impacting the timing of awards, slowing export licenses, and affecting cash collections. He expressed disappointment in the incongruency between the DoD's desire for speed and Congress's funding challenges, but remained optimistic about L3Harris's portfolio and readiness to move swiftly once the government reopens and decisions are made, anticipating a busy December to catch up.

Kristine Liwag asked about Hexcel's long-term portfolio strategy, given the improved stability and visibility in the business, specifically whether Hexcel plans to expand more into aftermarket, defense, or more vertically integrated component structures.

Answer

Tom Gentile, Chairman, CEO, and President, stated that the immediate number one priority is to focus exclusively on executing the ramp-up of production rates for existing customers, which is expected to generate significant operating leverage. He highlighted defense as the primary growth initiative for the immediate future, noting it's already 35% of the business and has strong growth potential in the U.S., Europe, and other international markets. He reiterated a 'laser focus' on executing rate ramps, delivering quality, and maintaining a safe work environment over the next couple of years.

Kristine Liwag asked about Hexcel's portfolio strategy, given the clear recovery in production rates and increased business stability. She inquired about potential expansion into aftermarket, defense, or more vertically integrated component structures.

Answer

Tom Gentile, Chairman, CEO, and President of Hexcel, stated that the immediate number one priority is to focus exclusively on ramping up production rates for existing programs, which is expected to generate significant operating leverage. He identified defense as the second key growth initiative, noting it already constitutes 35% of the business and has substantial growth potential in the U.S., Europe, and other international markets. Gentile reiterated Hexcel's laser focus on executing rate ramps, maintaining quality, and ensuring a safe work environment.

Kristine Liwag from Morgan Stanley asked for details on Hexcel's currency exposure in Europe, its hedging policy, and the potential margin impact of a weaker dollar. She also questioned why Hexcel may not be achieving the same level of pricing power as some peers in contract negotiations.

Answer

CFO Patrick Winterlich noted Hexcel enters each year roughly 75% hedged and that a weaker dollar would be a marginal headwind. CEO Tom Gentile addressed pricing, explaining that while maximizing price is the goal, negotiations involve strategic trade-offs, including positioning for critical future programs like the next-generation narrow-body aircraft.

Kristine Liwag questioned Lockheed Martin's approach to technology disruption, identifying areas where the company maintains a significant lead, and its role within the broader defense innovation ecosystem.

Answer

Jim Taiclet, Chairman, President and CEO, emphasized Lockheed Martin's daily engagement with disruptive technologies across all business areas, highlighting the need for collaboration across the entire American industry. He cited examples like the operable space-based interceptor for Golden Dome, military-hardened low-orbit satellites, and teaming with Saildrone to arm autonomous naval vehicles with reconfigured JAGM missiles, showcasing the company's focus on decisive military advantage.

Kristine Liwag asked about Lockheed Martin's approach to technology disruption, specific areas where the company maintains a significant lead, and its overall role within the broader defense innovation ecosystem.

Answer

Jim Taiclet, Chairman, President, and CEO, emphasized Lockheed Martin's daily engagement with disruptive technology across all business areas. He cited examples like building an operable space-based interceptor by 2028 and military-hardened low-orbit satellites. He also highlighted collaborations with new entrants, such as arming Saildrone autonomous ships with reconfigured JAGM missiles, to achieve decisive military advantage.

Kristine Liwag of Morgan Stanley asked for an assessment of the F-35 program's current role in modern warfare, its priority for the DOD amidst funding for other programs like the B-21, and the outlook for international orders.

Answer

CEO James Taiclet affirmed his high confidence in the F-35's enduring importance, citing its proven combat effectiveness and its status as the only 5th-generation fighter in production in the free world. He also described a strategic pivot to create a 'best value bridge' to 6th-generation capabilities by porting advanced R&D to the F-35 platform, aiming to deliver enhanced effectiveness at a fraction of the cost of a new aircraft.

Kristine Liwag of Morgan Stanley asked for an assessment of the F-35's current role in modern warfare, its priority level for the DOD, and the outlook for international orders, considering recent DOD budget cuts and funding shifts to other priorities like the B-21.

Answer

CEO James Taiclet expressed high confidence in the F-35's long-term importance, highlighting its proven combat performance in recent operations and its unique status as the only 5th-generation fighter in production in the free world. He also mentioned the company's strategic pivot to create a 'best value bridge' from 5th to 6th-generation capabilities for the F-35 and F-22 platforms.

Kristine Liwag asked about the underappreciated risks of tariffs on Lockheed Martin's business and inquired about new CFO Evan Scott's priorities as he navigates this environment.

Answer

Evan Scott, CFO, stated that while the company has protections and mitigation strategies for tariffs, the primary risk is the timing lag between incurring and recovering costs. Maria Lee, an executive, noted that 40% of contracts are cost-type, offering a buffer. Scott then outlined his priorities as maintaining momentum, focusing on shareholder value, and driving performance, speed, and growth.

Kristine Liwag asked about CEO Lisa Atherton's portfolio management strategy, whether she intends to grow or prune, and where she sees incremental opportunities. She also asked about Textron Systems' differentiation in autonomous systems, market evolution, and strengths compared to new players.

Answer

CEO Lisa Atherton stated that portfolio management is an ongoing process, evaluating businesses against returns, cash generation, and strategic fit. She aims to accelerate growth in high-quality aerospace and defense areas, citing ATAC's success and vertical integration efforts. She also mentioned the divestiture of the Powersports business as a correct move. For autonomous systems, she emphasized Textron Systems' decades of experience, high-rate affordable manufacturing, and proven reliability in austere environments across air, land, and sea platforms as key differentiators.

Kristine Liwag inquired about Textron's portfolio management strategy (growth vs. pruning) and Textron Systems' differentiation in the evolving autonomous systems market.

Answer

Lisa Atherton, CEO of Textron, stated that portfolio management is an ongoing process, evaluating businesses based on returns, cash generation, and strategic fit. She aims to accelerate growth in high-quality aerospace and defense areas, citing ATAC's success as an example of scaling smaller assets. Regarding Textron Systems, Atherton emphasized decades of experience, high-rate affordable manufacturing, and proven reliability in austere environments across unmanned air, land, and sea platforms as key differentiators against new market entrants.

Kristine Liwag from Morgan Stanley asked if tariffs on competitors could create an opportunity for market share or pricing gains at Aviation. She also inquired about customer reception and the service entry timeline for the eAviation Nuva V300.

Answer

Scott C. Donnelly, Chairman, CEO & President, was reluctant to speculate on long-term tariff impacts but acknowledged they could potentially normalize pricing dynamics. Regarding the Nuva V300, he noted ongoing flight tests and early interest from military applications but stated he sees 'no pathway' to commercial certification in the near term for this class of aircraft.

Kristine Liwag inquired about the demand environment for Bell's commercial helicopters and asked if Textron is seeing increased business jet demand from corporate clients due to manufacturing reshoring in the U.S.

Answer

Chairman and CEO Scott Donnelly described the commercial helicopter demand as 'solid' across all product lines and end markets, including paramilitary, medical, and oil and gas. Regarding business jets, he confirmed a strong demand environment but could not anecdotally correlate it directly to reshoring, suggesting instead that a favorable long-term economic outlook and tax policy are key drivers.

Kristine Liwag questioned the perceived conservatism in Northrop Grumman's 2026 revenue outlook, despite a record $96 billion backlog, asking about key variables for converting backlog to revenue and the potential impact of firming B-21 and F/A-XX contracts on the 2026 outlook.

Answer

Chair, CEO, and President Kathy Warden described the approach as balanced, acknowledging a dynamic environment. She highlighted investments in munitions, homeland defense, F/A-XX, and collaborative combat aircraft as future growth drivers, with timing difficult to predict for 2026 sales upside. CFO John Green added that confidence for increasing sales from these opportunities is much higher for 2027.

Kristine Liwag asked about the drivers behind the 2026 revenue outlook's conservatism despite a record $96 billion backlog, key variables for converting backlog to revenue, and the potential impact of B-21 and F/A-XX contracts on the 2026 outlook.

Answer

Kathy Warden, Chair, CEO, and President of Northrop Grumman, described the 2026 outlook as a 'balanced approach' given the dynamic environment. She noted investments in munitions, Golden Dome, FAXX, and CCA offerings, but the timing of contract progression makes 2026 sales upside difficult to predict, with more confidence for increased sales in 2027.

Kristine Liwag asked about the potential impact of FPXX and B-21 acceleration on Northrop Grumman's 2026 outlook, and inquired about the company's supply chain strategy, particularly concerning rare earths, and any watch items that could affect the 2026 outlook.

Answer

Kathy Warden, Chair, CEO, and President, explained that neither FPXX nor B-21 acceleration are included in the current 2026 outlook. FPXX would increase revenue but be dilutive to overall earnings initially due to its development nature, requiring investment but expected to be accretive long-term. B-21 ramp would also be upside to revenue, requiring CapEx investment for increased production rates, with improved returns expected over the long term. She noted that the company's two U.S. foundries for microelectronics mitigate rare earth dependency, and government efforts to establish additional domestic and allied sources are beneficial.

Kristine Liwag from Morgan Stanley asked how Northrop Grumman plans to maintain its long-term position in European markets amid a focus on indigenous capabilities, and which three programs management is most excited about given recent funding changes.

Answer

Chair, CEO & President Kathy Warden emphasized a strategy of partnership, citing the IBCS architecture's ability to integrate local systems and co-production agreements for munitions. She identified B-21, Sentinel, and E-2D as the three existing programs she is most excited about due to significant new funding and acceleration opportunities, while also highlighting the new opportunities presented by the Golden Dome for America initiative.

Kristine Liwag inquired about key risk retirement milestones for the B-21 program, the potential for further charges from tariffs, and Northrop Grumman's strategic advantages in AI compared to commercial competitors.

Answer

CEO Kathy Warden explained that B-21 is completing the EMD phase and has started LRIP, with the recent charge reflecting learning from scaling up production. She noted that in AI, Northrop's strength lies in mission expertise and integrating AI into complex defense systems, often partnering with commercial firms like NVIDIA for their platforms.

Kristine Liwag questioned RTX's strategy regarding portfolio composition and potential shareholder monetization, given its status as the largest aerospace defense company, unprecedented demand, and unique government actions, referencing a competitor's mission solutions carve-out and government investment.

Answer

Chris Calio, Chairman and CEO of RTX, expressed strong conviction that RTX's current structure is optimal for meeting both defense and commercial ramps and driving long-term value. He emphasized the competitive advantages of RTX's breadth and scale in technology, cost structure, market knowledge, and talent, which support large platform bets and innovation. Calio also highlighted RTX's unique position to compete in the converging commercial and defense tech environment, committing to continued investment in capacity and technology.

Kristine Liwag questioned RTX's portfolio composition and potential for shareholder monetization, considering its status as the largest aerospace defense company, government investment in CapEx, and a competitor's recent carve-out strategy.

Answer

Chairman and CEO Chris Calio expressed strong conviction in RTX's current structure to meet defense and commercial ramps, emphasizing its competitive advantage in technology, cost, market knowledge, and talent. He highlighted the need for a strong balance sheet for large platform bets and the unique positioning for the convergence of commercial and defense tech.

Kristine Liwag asked about the Boeing 737 MAX and 787 production run rates, the incremental margins on these programs as volumes increase, and their relation to overall Collins margins expectations.

Answer

CEO Chris Calio expressed satisfaction with the 737 rate approval and alignment with Boeing, affirming Collins' capacity to support the ramp while emphasizing supply chain health. CFO Neil Mitchill noted synchronization with Boeing's schedule, acknowledged margin challenges from a higher 787 mix, but expects improved absorption and margin expansion in Collins' OE business as rates rise, along with future aftermarket growth.

Kristine Liwag asked for an update on the production run rates for the Boeing 737 MAX and 787, how to think about incremental margins on these programs as volumes ramp up, and their relation to overall Collins margins expectations.

Answer

CEO and Chairman Chris Calio stated that Collins is aligned with Boeing's rates and has the capacity to support the ramp-up, emphasizing the importance of supply chain health. CFO Neil Mitchill acknowledged some margin challenges with a higher 787 mix but noted that increasing rates will lead to better absorption and contribute to Collins' OE business margin expansion, along with future aftermarket growth.

Kristine Liwag of Morgan Stanley asked about the long-term free cash flow potential, questioning if $10 billion could be a minimum level in 2027 and beyond given market tailwinds and the end of GTF-related cash outflows.

Answer

CFO Neil Mitchill reaffirmed the 2025 free cash flow guidance of $7.0-$7.5 billion and detailed the drivers for second-half growth. He noted that 2025 'operational' free cash flow is approximately $8.5 billion when excluding powder metal-related payments. While not committing to a $10 billion figure, he expressed confidence in strong future cash generation driven by OE and aftermarket growth, a robust defense backlog, and tax benefits.

Kristine Liwag asked if the aerospace and defense industry's role as a net exporter is part of discussions with the administration regarding tariffs and if RTX has the flexibility to ramp up capacity for a potential $1 trillion U.S. defense budget.

Answer

Executive Chairman and CEO Christopher Calio confirmed that RTX consistently advocates for the industry's position as a net exporter and a prime example of U.S. competitiveness. Regarding capacity, he stated that the company is already in an 'urgent mode' of increasing capacity across its footprint, citing recent investments in Arizona, Alabama, and Arkansas to meet strong current and future defense demand.

Kristine Liwag asked for a breakdown of the incremental investments driving the Q4 Adjusted EBITDA loss, their duration into fiscal year 2027, and whether FY27 would be Adjusted EBITDA profitable without these investments. She also inquired about the scalability and profitability of the AXA contract for incremental insurance customers.

Answer

CFO and COO Ashley Johnson reiterated the target for FY27 Adjusted EBITDA profitability (break-even or better), noting Q4 investments are a ramp-up for new contracts, with scaling revenue expected to support sustained investments and profitability goals. CEO, Chairperson, and Co-founder Will Marshall stated the AXA contract is highly scalable with extremely high direct margins for data. He highlighted AXA's plan to offer Planet's products on their platform to other insurance partners, indicating significant incremental margins and future growth potential in the commercial sector, particularly insurance and finance.

Kristine Liwag from Morgan Stanley questioned the potential risk from NASA's proposed budget cuts and asked whether the expected tapering of high customer usage from Q1 reflects lower demand or seasonality.

Answer

CEO Will Marshall positioned the NASA budget situation as an opportunity, noting the administration's push for lower-cost solutions. President & CFO Ashley Fieglein Johnson clarified that usage patterns can be seasonal but also that some government clients may throttle usage to stay within annual budgets, which is a forecasting consideration rather than a signal of weakening demand.

Kristine Liwag of Morgan Stanley asked for more details on the new NATO contract and its potential size, inquired about the expected contributions from the first Tanager satellite, and questioned Planet's positioning for the NGA's AI data labeling initiative.

Answer

CEO Will Marshall described the NATO deal as a significant, ramping opportunity, confirming the program has government commitments of up to $1 billion over five years. He noted the first Tanager satellite is in commissioning, with a nascent but promising market being developed with customers in environmental, government, oil and gas, and agriculture sectors. Marshall clarified that the NGA's initiative is focused on data labeling, which Planet does not do, positioning the company's strengths in applying foundation models to its data for threat detection.

Kristine Liwag inquired about the details of the eVTOL Integration Pilot Program (EIPP), including the types of operations BETA intends to support and whether it will involve both CTOL and VTOL aircraft.

Answer

Kyle Clark, CEO of BETA Technologies, explained that the EIPP will initially focus on CTOL aircraft for cargo, medical, and logistics, with VTOL aircraft following approximately 12 months later. He noted that BETA is involved in at least 10 state applications for the program, with commercial operations potentially launching as early as June next year.

Kristine Liwag sought clarification on Rocket Lab's stance regarding acquiring spectrum and inquired about the company's M&A priorities given over $1 billion in liquidity and expanded space systems capabilities. She also asked about Rocket Lab's long-term role in the industry, specifically if it aims to own its own constellation and offer services, similar to SpaceX's end-to-end approach.

Answer

Peter Beck, Founder and CEO, Rocket Lab, confirmed the company would not speculatively buy spectrum. He outlined M&A priorities including tuck-ins for new capabilities (like Mynaric), acquisitions that provide access to new customer sets and capabilities (like GEOS), and larger 'needle-moving' opportunities. He stated Rocket Lab is methodically amassing strategic elements, with Neutron providing multi-ton launch capability and the space systems group capable of building any satellite, positioning the company to be strategic about building its own constellation or providing services/infrastructure.

Kristine Liwag questioned why Neutron's backlog isn't larger given market demand, asked about the cash flow trajectory post-Neutron's first flight, and probed the company's capital needs and M&A appetite for future growth.

Answer

CEO Sir Peter Beck explained that commercial customers want to see Neutron fly successfully before committing. CFO Adam Spice projected that positive free cash flow is more likely in 2027 than 2026 due to scaling investments, but the P&L will improve sooner. He affirmed that current capital is sufficient for scaling Neutron and that any future raises would fund inorganic growth. Both executives indicated that M&A activity to expand capabilities will continue.

Kristine Liwag asked about Joby Aviation's plans for international commercial service, specifically whether operations would commence in partnership with early adopters prior to receiving full FAA certification, and followed up on the integration timeline and capabilities of the Super Pilot autonomous system into the S4 aircraft, including VFR/IFR expansion.

Answer

JoeBen Bevirt (CEO) confirmed expectations for operational readiness in Dubai prior to FAA-type certification, citing strong regulatory support and ongoing flight demonstrations. Regarding autonomy, Mr. Bevirt detailed the Super Pilot's proven operational maturity from Pacific exercises and outlined a progressive, step-by-step integration into the S4 platform, emphasizing safety, efficiency benefits, and collaboration with NVIDIA.

Kristine Liwag of Morgan Stanley inquired how the Blade acquisition alters Joby's initial U.S. commercial service plans, particularly regarding the first launch cities. She also asked about the status of airspace usage approvals in New York and the remaining steps in Stage 4 and 5 of the FAA certification process.

Answer

Founder and CEO JoeBen Bevirt stated that the Blade acquisition significantly 'supercharges' their operational readiness in New York with existing infrastructure and a loyal customer base. He clarified that no additional airspace work beyond Blade's current operations is expected and reminded that a Part 135 certificate is needed after type certification. He noted Joby is 70% complete with its Stage 4 work and does not need to reach 100% before beginning TIA flights.

Kristine Liwag of Morgan Stanley requested details on the planned initial commercial service in Dubai, including aircraft numbers, operating model, and potential economics, and asked about discussions with the FAA on managing future air traffic control volume in the U.S.

Answer

Founder and CEO JoeBen Bevirt explained the Dubai launch will start small with a few aircraft and vertiports, scaling up with support from the RTA. Executive Chairman Paul Sciarra added that route planning is ongoing. Regarding U.S. ATC, Bevirt expressed confidence in national support for investing in next-generation air traffic systems to increase capacity.

Kristine Liwag with Morgan Stanley inquired about Embraer's strategy for future shareholder returns, including potential share buybacks or increased dividends, given the company's projected net cash position by year-end and the absence of a major R&D cycle. She also asked for an update on Embraer's involvement in American Airlines' E-Jets retrofit program, specifically if Embraer is handling the complete interior refresh and its potential to capture more of this market with expanded services.

Answer

CFO Antonio Carlos Garcia confirmed the company resumed dividends and is evaluating its capital structure, with share buybacks under discussion. President and CEO Francisco Gomes Neto clarified that the E-Jets retrofit is part of an E175 E1 improvement initiative, including new seats, lighting, and connectivity, with the kit available for other customers and services offered at Embraer's new Dallas MRO.

Kristine Liwag asked about Embraer's balance sheet strength, the expected net cash position by year-end, and the company's plans for future returns to shareholders, specifically inquiring about share buybacks or increased dividends. She also followed up on the American Airlines E-Jets retrofit program, asking about the scope of Embraer's involvement and the potential for capturing more of this market with expanded services.

Answer

CFO Antonio Carlos Garcia stated that Embraer is evaluating its capital structure, currently paying 25% of net income in dividends, and while no additional dividends are planned at this point, share buybacks are 'on the table' for discussion. CEO Francisco Gomes Neto confirmed Embraer's involvement in the American Airlines E175 E1 interior refresh, which includes new bins, Recaro seats, modern lighting, and improved connectivity. He noted this kit is available to other customers and can be installed at Embraer's new MRO facility in Dallas.

Kristine Liwag of Morgan Stanley inquired about how customer conversations have changed since the threat of a 50% tariff was averted, and whether this has created more urgency for US customers to place new orders for the E175 jet.

Answer

President & CEO Francisco Neto explained that Embraer has been actively mitigating tariff impacts, noting the final tariff on the E175 is below 10% due to its high U.S. content. While the removal of the 50% threat is positive, the primary focus remains on restoring the zero-tariff rule. He stated that the company does not expect significant new E175 orders for the remainder of the year.

Kristine Liwag of Morgan Stanley asked for an update on KC-390 sales campaigns in India and other regions, potential bundling with E2s, and the evolution of discussions around a larger Embraer aircraft.

Answer

CEO Francisco Gomes Neto reported progress on the India KC-390 campaign and other active campaigns. While direct bundling of KC-390 and E2s is not occurring, he noted potential for broad industrial partnerships in countries ordering both. Regarding a larger jet, he confirmed customer interest but stated Embraer's focus remains on the E2 family and foundational technology development.

Kristine Liwag questioned Embraer's confidence in its 2024 delivery guidance, especially as other manufacturers face supply chain issues, and asked for more color on the conservatism of their guidance range.

Answer

President and CEO Francisco Neto expressed confidence in meeting the full-year guidance. He detailed proactive measures, including reinforcing the supply chain team, co-locating staff with critical suppliers, and implementing digital tools and AI to anticipate and manage challenges.

Kristine Liwag asked about Howmet Aerospace's competitive landscape, technology differentiation, pricing environment, and expected returns in the industrial gas turbine (IGT) sector, particularly in light of the data center buildout, and how these compare to the aerospace segment.

Answer

Executive Chairman and CEO John Plant detailed the extraordinary demand from data centers, the strategic shift towards natural gas, and Howmet's increased capital expenditures for 2026 and 2027 to support this growth. He highlighted the evolution of turbine technology towards more sophisticated cored blades, similar to aerospace, and confirmed that the economic returns for IGT are comparable to those in aerospace, driving significant expansion across three major manufacturing sites.

Kristine Liwag with Morgan Stanley inquired about the competitive landscape, technology differentiation, pricing, and expected returns for Howmet Aerospace's turbine and industrial gas turbine (IGT) business, particularly in the context of the data center buildout, comparing it to aerospace returns.

Answer

Executive Chairman and CEO John Plant detailed the extraordinary demand for electricity driven by data centers, noting a shift towards natural gas and midsize turbines for independent or fast-acting supply. He explained that Howmet's technology in IGT is evolving similarly to aerospace, moving to cored turbine blades for higher temperatures, increasing content and value. Plant highlighted significant capital expenditures for expansion in Michigan, Europe, and existing U.S. facilities, expecting similar high returns as aerospace.

Kristine Liwag of Morgan Stanley asked about potential supply chain bottlenecks that could hinder OEM ramps and for an update on order intake related to the Precision Castparts (PCC) facility accident.

Answer

Executive Chairman and CEO John Plant identified the build-out of narrow-body engines as a critical area to watch, noting the large number of engineless aircraft at Airbus. On the PCC matter, he stated that Howmet has now secured close to $40 million in orders, up from the $25 million mentioned last quarter. The company is still bidding on several hundred additional part numbers and expects the new business to contribute to revenue growth over the next twelve months.

Kristine Liwag from Morgan Stanley asked about the long-term potential for incremental margins given Howmet's transformation and future production rates, and also about capital allocation priorities, including returning 100% of free cash flow.

Answer

Executive Chairman and CEO John Plant stated that predicting long-term margins is difficult due to market volatility. On capital allocation, he highlighted a strong track record of cash return, confirming plans for a larger share buyback in 2025 and an increased dividend, while also deleveraging the balance sheet towards a 1.1x net debt to EBITDA target.

Kristine Liwag inquired about the assumptions underpinning Howmet's 2025 guidance, particularly the build rate expectations for commercial aerospace.

Answer

Executive Chairman and CEO John Plant explained that the 12% commercial aerospace growth forecast for 2025 is a cautious estimate, as external forecasts seem unrealistic given ongoing uncertainties, especially with Boeing's production ramp post-strike. He characterized 2024 as a 'miserable year' for aircraft builds and stated the company is taking a conservative 'art of the possible' approach until production rates become clearer.

Kristine T. Liwag inquired about Boeing's current portfolio strategy, M&A priorities, and the expected free cash flow impact of the Jeppesen and Spirit AeroSystems transactions in the next year.

Answer

President and CEO Dave Calhoun stated that the Jeppesen and Spirit AeroSystems transactions are the company's immediate M&A focus. He expects the Jeppesen deal to close soon, followed by Spirit AeroSystems after U.S. regulatory approval. He noted that the current priority is on de-integrating Jeppesen and reintegrating Spirit AeroSystems, with no other M&A areas to highlight at this time.

Kristine Liwag asked about Boeing's current portfolio strategy, M&A priorities (specifically Jeppesen and Spirit AeroSystems), and the anticipated impact of these two transactions on free cash flow in the next year.

Answer

President and CEO Dave Calhoun stated that the immediate M&A focus is on closing the Jeppesen sale and the Spirit AeroSystems transaction. He expects Jeppesen to close first, followed by Spirit AeroSystems after U.S. regulatory approval. He noted that the focus is on de-integrating Jeppesen and reintegrating Spirit AeroSystems, with no other M&A areas currently highlighted.

Kristine Liwag of Morgan Stanley asked CEO Kelly Ortberg to reflect on his first year at Boeing, including his biggest surprises and his key priorities for 2026.

Answer

President & CEO Kelly Ortberg said he was pleased with the company's progress in turning the ship around but acknowledged much work remains. He noted that any surprises were more related to macro dynamics than internal issues. His priorities remain focused on improving performance, restoring trust with customers and stakeholders, and building confidence in the company's products and processes.

Kristine Liwag asked for more details on the germanium sourcing strategy, including inventory levels, timeline, and quantity. She also inquired about the strategy behind the Hoverfly investment and its fit into the broader portfolio, and the drivers of IMS's significant growth in the quarter.

Answer

Chairman and CEO William Lynn explained that DRS used buffer stock for 2025, is actively recycling germanium from older optics to bridge into 2026, and is developing partnerships outside of China for long-term supply. CFO Michael Dippold stated that the Hoverfly investment aligns with the strategy of bringing best-of-breed technologies for elevated sensing, targeting, and Counter-UAS applications. He clarified that IMS revenue growth was primarily driven by short-range air defense and Counter-UAS programs, rather than a significant change in Columbia class program cadence.

Kristine Liwag asked for more details on the germanium sourcing strategy, including inventory levels, timeline, and quantity. She also inquired about the strategy behind the Hoverfly investment and its fit into the broader portfolio, and the drivers of IMS's significant growth in the quarter.

Answer

Chairman and CEO William Lynn explained that DRS used buffer stock for 2025, is actively recycling germanium from older optics to bridge into 2026, and is developing partnerships outside of China for long-term supply. CFO Michael Dippold stated that the Hoverfly investment aligns with the strategy of bringing best-of-breed technologies for elevated sensing, targeting, and Counter-UAS applications. He clarified that IMS revenue growth was primarily driven by short-range air defense and Counter-UAS programs, rather than a significant change in Columbia class program cadence.

Kristine Liwag of Morgan Stanley asked about risks from other rare earth metals besides germanium and the potential operational impact if shortages persist. She also questioned how European governments perceive DRS, given its U.S. base and European parent, and how this affects business opportunities.

Answer

Chairman & CEO William Lynn identified permanent magnets for the electric power business as another material of focus but stated current supplies are secure. On European perception, he affirmed DRS is viewed as a U.S. company but has a unique opportunity to partner with its majority shareholder, Leonardo, to operate as a 'home team' in Europe, citing opportunities in the UK.

On behalf of Kristine Liwag from Morgan Stanley, an analyst asked about the risks and opportunities for DRS from the U.S. Army's transformation and sought to reconcile DRS's healthy bookings with peer commentary about slower contracting activity.

Answer

CEO William Lynn expressed confidence in DRS's position with the Army, highlighting the growing need for longer-range sensors and the company's platform-agnostic technology that can pivot to legacy upgrades or new autonomous vehicles. He stated that DRS did not see any slowdown in customer demand, with bookings in Q1 exceeding expectations at nearly $1 billion, resulting in a 1.2 book-to-bill ratio.

An analyst on for Kristine Liwag asked if the 2025 growth profile would be similar across the ASC and IMS segments and requested an update on the South Carolina facility build-out and related CapEx.

Answer

CFO Mike Dippold stated that both segments are expected to contribute to 2025 growth, with the IMS segment having an additional tailwind from favorable Columbia program pricing. He also noted that CapEx for the year would be in the mid-to-high 3% range of revenue, with a ramp-up in Q4 as the South Carolina project catches up from a slower first half.

Kristine Liwag asked about the drivers behind the notable step-up in the unfunded backlog for the Technologies segment, when it might convert to funded backlog or revenue, and if supersonic programs are being considered for Gulfstream's next new offering.

Answer

Phebe Novakovic, Chairman and CEO of General Dynamics, attributed the increase in Technologies' unfunded backlog to timing and strong demand across the portfolio, particularly GDIT's robust book-to-bill from investments in cyber, zero trust, and AI. She stated there is 'zero way' she would comment on future Gulfstream programs and that a viable business case for supersonic aircraft has not been identified.

Kristine Liwag asked for quantification of potential cost savings GDIT could provide the government and its impact on revenue. She also inquired about customer behavior and pricing for older Gulfstream models as the new G700 and G800 enter service.

Answer

Jason Aiken, EVP of Technologies, declined to quantify potential savings, deeming it inappropriate during ongoing customer dialogues. Phebe Novakovic, Chairman and CEO, addressed the Gulfstream question, stating that demand for the G500 and G600 remains strong as they serve different mission profiles. She also noted the final G650 delivery occurred in the quarter, marking the end of its production.

Kristine Liwag of Morgan Stanley asked for clarification on Teledyne's $500 million European defense exposure and sought insights into the go-to-market strategy for drones and counter-unmanned air systems, specifically regarding prime versus subprime roles and in-country production.

Answer

Executive Chairman Robert Mehrabian clarified that $500 million represents total military sales this year, with nano drones projected to reach $500 million by the end of next year. He explained Teledyne's dual role as prime (loitering munitions, nano drones) and subprime (counter-UAS partners), emphasizing the strategic importance of its 5,100 European employees and in-country production capabilities.

Kristine Liwag requested clarification on the $0.5 billion figure for European defense exposure, specifically whether it encompasses all defense sales or only drone exposure. She also asked about Teledyne's go-to-market strategy for drones and counter-unmanned air systems, including the balance between being a prime contractor and leveraging core competencies in sensors.

Answer

Executive Chairman Robert Mehrabian clarified that the $0.5 billion figure applies to both total military sales in Europe for the current year and the cumulative sales of nano drones through next year. He explained that Teledyne acts as both a prime and subprime contractor in defense, citing loitering munitions and nano drones as prime examples. He emphasized the importance of Teledyne's strong presence and in-country production capabilities across Europe, where 5,100 of its 15,600-15,700 employees are located.

Kristine Liwag asked about the nature and maturity of the Alpha thermal protection system design change and the impact of adjusting the rocket's angle of attack on mission capabilities. She also inquired about further opportunities to sell data from Blue Ghost Mission 1, the potential size of this annuity, and the revenue recognition and profitability expectations for the Blue Ghost Mission 4 contract.

Answer

CEO Jason Kim clarified that the Alpha design change involves adding more layers of thermal protection with negligible mass impact, and the angle of attack can be controlled during critical flight phases without changing mission capabilities. He confirmed Firefly owns the Blue Ghost Mission 1 data and plans multiple commercial data sales, including through the Oculus service. CFO Darren Ma added that engineering change proposals are common, increasing contract value and providing higher-margin revenue. For Blue Ghost Mission 4, Mr. Ma noted it was a planned win, with revenue recognized on a percentage-of-completion basis, similar to Blue Ghost Mission 1.

Kristine Liwag asked about the nature and maturity of Alpha's thermal protection system design change and whether the adjusted angle of attack impacts mission capabilities. She also explored opportunities to sell additional Blue Ghost Mission 1 data to other customers and the potential annuity from such contracts, and inquired about Blue Ghost Mission 4 contract terms, revenue recognition, and profitability metrics.

Answer

CEO Jason Kim clarified that the Alpha change is a minor addition of thermal protection layers with negligible mass impact, and the angle of attack is controllable. He confirmed Firefly owns and can sell Blue Ghost Mission 1 data, seeing it as a core part of the Oculus service. CFO Darren Ma added that engineering change proposals are common, increasing contract value and offering higher-margin revenue streams. Mr. Ma also noted that Blue Ghost Mission 4 revenue will be recognized on a percentage-of-completion basis, similar to Mission 1.

Kristine Liwag asked about the nature and maturity of the Alpha design changes related to thermal protection reinforcement and angle of attack, and whether these changes impact mission fulfillment. She also inquired about further opportunities to sell data, similar to the $10 million NASA addendum for Blue Ghost Mission 1, and the potential size of this annuity revenue. Finally, she asked about the Blue Ghost Mission 4 contract terms versus expectations, its revenue recognition given a 2029 launch, and relevant profitability metrics.

Answer

CEO Jason Kim clarified that the Alpha design change is minor, involving additional thermal protection layers with negligible mass impact, and the angle of attack can be controlled without affecting mission fulfillment. Regarding data sales, Mr. Kim confirmed Firefly owns the data and plans multiple sales, with the NASA addendum being the first of many, core to the Oculus service. CFO Darren Ma added that engineering change proposals are common, increasing contract value, and provide differentiated, higher-margin revenue streams. For Blue Ghost Mission 4, Mr. Ma stated it aligned with expectations, converting opportunities into backlog, and revenue will be recognized on a percentage-of-completion basis, similar to Blue Ghost Mission 1.

Kristine Liwag probed the CFM56 engine exchange program, asking about its value proposition for customers, its margin profile compared to standard overhauls, and how it operates without a large inventory pool.

Answer

CEO Russell Ford highlighted the program's advantages in speed and cost-effectiveness, offering solutions tailored to customer needs. He stated margins are consistent with normal CFM56 work, with upside from USM and in-house repairs. He clarified the model is a 'one-for-one' exchange initiated with a modest, self-funding investment, not a large, capital-intensive inventory pool.

Kristine Liwag of Morgan Stanley questioned the valuation of the Beadlight acquisition, seeking details on its 2026 accretion drivers, its product characteristics (e.g., proprietary nature), and the competitiveness of the deal process.

Answer

Founder, CEO & Executive Co-Chairman Dirksen Charles defended the acquisition price, stating it was a proprietary deal that will prove to be 'cheap' based on future growth, which he expects to be 'significantly accretive' even without LOR's influence. He confirmed the portfolio is 100% proprietary. Executive Co-Chairman Brett Milgrim added that the M&A pipeline remains robust with many similar proprietary opportunities, though their timing is unpredictable.

Kristine Liwag of Morgan Stanley asked about management's primary focus areas given the strong demand and stable supply chain. She followed up by asking for more color on the surprisingly active M&A pipeline and whether Loar would consider levering up beyond its target for the right opportunity.

Answer

CEO Dirkson Charles identified the M&A pipeline and talent development as top priorities. CFO Glenn D'Alessandro added that the M&A environment is strong, possibly accelerated by good earnings visibility and Loar's increased profile as a public company. He also stated that given the strength of the balance sheet, the company will not need to exceed its leverage targets for current opportunities.

Kristine Liwag of Morgan Stanley asked for an update on Loar's Parts Manufacturer Approval (PMA) pipeline and questioned if the long-term growth target of 1-3% from new products is conservative, given the potential for rapid market adoption upon certification.

Answer

CEO Dirkson Charles acknowledged that PMA adoption can create a significant revenue jump post-certification. He clarified that key initiatives, such as those for brakes, are progressing through testing and that adoption benefits are expected in late 2025 and early 2026. He also mentioned a new marketing agreement for other products that will contribute in the second half of 2025, stating that while there will be jumps, the 1-3% annual contribution remains a good long-term goal.

Kristine Liwag questioned the confidence in the 2025 guidance in light of recent contract terminations at DHS and asked how potential NASA budget cuts are factored into the forecast, given Amentum's space exposure.

Answer

CEO John Heller reiterated confidence in the FY25 guide, citing that over 98% of revenue is from existing or recompete work. CFO Travis Johnson addressed the NASA question, stating their work is dominated by the prioritized Artemis II and III missions for the next several years, and they expect no material impact to FY25 from proposed budget changes.

Kristine Liwag questioned the confidence in the 2025 guide given recent contract terminations at DHS and asked about the potential impact of proposed NASA budget cuts on Amentum's space business and guidance.

Answer

CEO John Heller expressed confidence in the FY25 guidance, highlighting that over 98% of expected revenue comes from existing or recompete work. Regarding NASA, CFO Travis Johnson explained that Amentum's work is dominated by the high-priority Artemis II and III missions for the next several years, which are well-supported. While post-Artemis III changes are possible, management does not expect any material impact on FY25 results from the proposed budget.

Kristine Liwag from Morgan Stanley asked for an update on the competitive landscape, including OEM second-sourcing and PMAs. She also inquired about the Simmons acquisition from RTX, the process, and the potential for more large OEM carve-outs.

Answer

Co-COO Mike Lisman stated there have been no material changes in the competitive landscape from second-sourcing or PMAs, which the company constantly monitors. While not commenting on the specifics of the Simmons auction, he acknowledged that the shifting industry landscape, with divestitures and spin-offs, continues to create acquisition opportunities for TransDigm.

Kristine Liwag questioned the implied margin step-down in the second-half guidance, inquired about incoming CEO Mike Lisman's strategic priorities, and sought details on the drivers for the raised defense outlook.

Answer

President and CEO Kevin Stein acknowledged the guidance contains conservatism. Incoming CEO Mike Lisman stated he anticipates "no meaningful changes" in strategy, emphasizing his long-standing alignment with Kevin. Lisman also noted the strength in defense was "pretty uniform" across businesses, covering both OEM and aftermarket, and was supported by strong bookings.

Kristine Liwag of Morgan Stanley asked about the potential to increase shipset content on other missile programs beyond NGI, the size of the related business pipeline, and the significance of the recent NGI static hot fire test.

Answer

CFO Phil De Sousa quantified the opportunity, stating that beyond the ~$1 billion NGI production opportunity, there is roughly another $1 billion in potential awards being pursued with primes on other missile defense programs. CEO Dylan Taylor emphasized that the successful hot fire test was a critical part of the CDR milestone, de-risking the technology for customers. He also noted the acquisition of Optical Physics Company (OPC) increased Voyager's value capture on NGI's optical navigation system.

Kristine Liwag of Morgan Stanley inquired about the details of RBC Bearings' five-year outlook, associated capital expenditure needs, and the potential for margin expansion. She also asked about the expected impact of the recently signed infrastructure bill on the industrial business.

Answer

Chairman, President & CEO Dr. Michael Hartnett explained that the five-year plan involves detailed, account-level analysis to align capacity with customer demand, particularly from major aerospace OEMs. He anticipates CapEx will remain in the 3-4% of sales range. Dr. Hartnett described the tax incentives in the new bill as "catnip" for smaller industrial customers, expecting it to favorably drive demand for equipment and RBC's products.

Kristine Liwag of Morgan Stanley inquired about the specifics of RBC Bearings' five-year outlook, its implications for capital expenditures and margins, and the potential impact of the recently signed tax bill on the industrial business.

Answer

Dr. Michael Hartnett, Chairman, President & CEO, explained that the five-year plan involves detailed account-level analysis to align capacity with customer demand, projecting CapEx to remain stable at 3-4% of sales. He described the tax bill's investment expensing provision as "catnip" for smaller industrial customers, expecting it to favorably drive demand for RBC's products.

Kristine Liwag of Morgan Stanley inquired about the components of RBC Bearings' five-year outlook, the implications for CapEx and aerospace margins, and the potential impact of recent tax legislation on the industrial business and its backlog.

Answer

Chairman, President & CEO Michael Hartnett explained that the five-year plan involves detailed account-level forecasting to guide capacity decisions, with CapEx expected to remain around 3-4% of depreciation. He described the tax bill's expensing provisions as 'catnip' for smaller industrial customers, anticipating a positive demand influence separate from the aerospace sector.

Kristine Liwag of Morgan Stanley asked for an estimate of RBC's commercial aerospace revenue potential at higher Boeing production rates, inquired about the specific drivers of the Industrial segment's outperformance, and questioned how the successful Dodge integration impacts the company's M&A strategy and aperture for future deals.

Answer

Executive Mike Hartnett provided specific revenue uplift figures for rate increases on the 737, 787, and A320 programs. He attributed industrial growth to improving service levels, launching new products at Dodge, and long-term pipeline opportunities. On M&A, he explained that the Dodge success reinforces their confidence and detailed their strategy of targeting companies serving existing customers to leverage relationships and their deep manufacturing expertise for synergy.

Kristine Liwag from Morgan Stanley questioned AerCap's long-term growth prospects given its large scale and decelerating order book post-2027, and asked when the net spread might begin to expand again.

Answer

CEO Aengus Kelly expressed confidence in long-term growth, emphasizing that the company's focus is on profitable growth and value creation, not growth for its own sake. CFO Pete Juhas projected that the net spread would expand from current levels due to rising portfolio lease rate factors and tailwinds from the roll-off of COVID-era leases, while reiterating that the primary management metric is EPS.

Kristine Liwag of Morgan Stanley questioned AerCap's long-term growth trajectory given its large scale and whether achieving outsized returns is becoming more difficult. She also asked about potential ways to reduce interest costs and when the net spread might expand.

Answer

CEO Aengus Kelly expressed confidence in long-term growth, noting the aviation industry doubles every 20 years and that AerCap's goal is profitable growth, not growth at any price. He reiterated that buying back AerCap stock is often the best investment. CFO Pete Juhas projected that the net spread will expand going forward as portfolio lease yields continue to climb. He added that the company is not at peak profitability, as the financial benefits of current strong market deals will flow through in the coming years.

Kristine Liwag of Morgan Stanley asked about airline customer reception of the module exchange program, the nature of the deal with a major U.S. airline, the path to reaching 1,800 annual module capacity, and the future M&A strategy for repair capabilities.

Answer

David Moreno, COO, detailed the production ramp-up, attributing it to specialization at the Montreal facility and the integration of the new Rome shop. Joseph Adams, Chairman, CEO & Director, described customer reception as excellent, as the MRE program saves airlines time and money while eliminating risk. He added that technician hiring is the main constraint to reaching full capacity, which is being addressed via a new training academy and augmented reality tools. Future M&A will focus on piece-part repair to further vertical integration.

Kristine Liwag sought clarification on the components of the first-half free cash flow forecast, specifically the timing of a $200 million inventory investment. She also asked about the sourcing of attractively priced CFM56 parts and if prices are rising.

Answer

CEO Joseph Adams provided a detailed breakdown of the H1 2025 free cash flow projection, confirming the $200 million parts investment is included in the calculation that yields $350 million. Regarding sourcing, Adams explained their advantage comes from buying unserviceable parts and using in-house repair capabilities, which lowers costs. He acknowledged that parts prices are beginning to increase.

Kristine Liwag inquired about FTAI's competitive moat, asking why competitors have not replicated its vertically integrated model. She also asked about the Strategic Capital Initiative (SCI), specifically the drivers for its increased size to $4 billion and the definition of success for the investment vehicle.

Answer

CEO Joe Adams explained that FTAI's moat is built on a multi-year strategy of owning a large, focused engine fleet and dedicated maintenance facilities, similar to major airlines but offered as an outsourced service. He highlighted exclusive PMA parts and the new SCI as significant, hard-to-replicate barriers. Regarding the SCI, Adams noted that favorable debt terms allowed for higher leverage and increased size, supported by a strong deal flow of over $1 billion already committed. Success is defined by delivering higher returns at lower risk to investors, capitalizing on a market opportunity exceeding $20 billion annually.

Kristine Liwag asked about the specific drivers behind the aftermarket's strong 16% organic growth and questioned HEICO's pricing strategy relative to OEMs, who are aggressively raising prices.

Answer

Co-CEO Eric Mendelson attributed the growth to a combination of cost savings for airlines, high parts availability, and HEICO's credibility at scale. He emphasized that while HEICO could raise prices more, it intentionally restrains pricing for loyal, long-term customers to build relationships, passing on only direct cost increases.

Kristine Liwag asked about the current administration's support for nuclear energy and how geopolitical uncertainty and tariffs might affect international projects in Poland and Bulgaria. She also inquired about the timeline for realizing benefits from the increased emphasis on shipbuilding.

Answer

CEO Lynn Bamford expressed strong confidence in the administration's support for nuclear energy, citing direct involvement from officials in advancing projects in Poland and Bulgaria. Regarding shipbuilding, she acknowledged that major programs take time but highlighted immediate benefits, such as an increase in industrial-based funding from $15 million to $21 million and new opportunities to gain share on existing fleet maintenance.

Speaking on behalf of Kristine Liwag, Justin asked for management's thoughts on potential risks from the upcoming U.S. election to the defense and commercial nuclear businesses, and for an update on the M&A pipeline and capital deployment.

Answer

CEO Lynn Bamford expressed confidence due to strong bipartisan support for defense spending and nuclear leadership, seeing minimal risk from the election. She confirmed the M&A pipeline is active, with the immediate focus on closing the Ultra Energy deal. CFO Chris Farkas added that the balance sheet will remain strong post-acquisition, positioning them well for future M&A.

Justin, on behalf of Kristine Liwag, asked about the decline in Middle East revenue and whether the company expects its book-to-bill ratio to be above 1.0 for the full year.

Answer

SVP and CFO Shawn Mural explained the Middle East revenue dip was due to timing and tough year-over-year comparisons, and was consistent with their internal plan. Regarding bookings, he stated that V2X expects to add to its backlog for the full year (implying a book-to-bill above 1.0), with a back-half weighted profile for new orders that will be more fixed-price and domestic in nature.

Kristine Liwag of Morgan Stanley sought to understand the risks to the Civil outlook, asking how much of the second-half forecast is already booked and how potential new aircraft delivery delays could further impact pilot hiring.

Answer

CEO Marc Parent clarified that simulator deliveries and business aviation bookings provide high visibility and stability. He identified the main risk as the assumption of a pilot hiring recovery in the Americas, which is based on current bookings and customer expectations. He emphasized that the company built conservatism into its outlook and is managing risk through cost savings and adjusting CapEx to the low end of its guided range.

Asked about the extent of Boeing's financial support, including whether Boeing could help underwrite the 2025 debt refinancing. Also asked about expected 737 margins in 2026 given inflation and the pricing step-down.

Answer

Mark Suchinski described the Boeing MOA as a "win-win" agreement, not charity, and stated that Spirit has access to capital markets and does not need Boeing to underwrite its refinancing. He deferred the question about 2026 737 margins, saying the focus is on 2023 and the upcoming 2024 guidance.