Miles Walton

Miles Walton asked about the non-seasonal pickup in order activity at the start of the year, its origin, unusual nature, and any quantification. He also inquired about the year-end backlog.

Answer

CEO Kim Fields confirmed an uptick in orders and inquiries in the first 30 days of the year, attributing it to supply chain readiness moves in anticipation of Boeing's progress and upcoming rate increases, noting it was stronger than seen in recent years for airframe applications. She stated that the backlog remains just under one year of revenue, around the target, but lead times for proprietary and exotic materials are extending (up to 2x since a quarter ago), which might cause the backlog to increase slightly. She clarified that much demand is contracted, providing reserved spots rather than speculative buying.

Miles Walton inquired about the specific quantum and duration of the "excess advances" and "customer considerations" impacting Boeing's free cash flow, seeking clarification on their individual magnitude and expected normalization timeline.

Answer

Jay Malave, Boeing's Executive Vice President and Chief Financial Officer, explained that while not providing individual breakouts, the aggregate impact of these items falls within the low to high single-digit billion range. He noted that excess advances are expected to burn down quicker than customer considerations, with the overall resolution tied to achieving higher production rates and improved delivery performance. Malave also mentioned the 777X cash burn is projected to improve over time, turning positive by 2029, and BDS performance is also expected to improve.

Miles Walton asked about any net effect of the government shutdown on Northrop Grumman's Q4 2025 P&L or cash flow statement. He also posed a broader question about how a seismic shift in the defense budget, such as a $1.5 trillion recommendation, would lead to a strategic shift in the company's portfolio positioning and investments.

Answer

CFO John Green stated there was no major material impact from the shutdown on 2025 results, citing strong year-over-year growth and exceeding sales guidance. Chair, CEO, and President Kathy Warden explained that the company is already preparing for an accelerated growth environment by focusing on speed, capacity building, and preserving cash for unprecedented growth opportunities, emphasizing a transformative approach to meet demand.

Miles Walton requested more detail on the growth rates of Raytheon's larger Strategic Defense Units (SDUs), specifically referencing the 20% growth in some sectors. He also asked Chris Calio if RTX had engaged with the administration to change any behavior following their comments, and if so, what specific requests were made.

Answer

Neil Mitchill, CFO of RTX, stated that over half of Raytheon's sales increase is from the land and air defense systems business, supported by 11 consecutive quarters of material growth and expected mid-to-high single-digit material growth in 2026 for programs like Patriot, GEM-T, and LTAMDS. He noted 85% of 2026 sales are in backlog. Chris Calio, Chairman and CEO, confirmed full support for DoD transformation, working in partnership on accelerating output, optimizing existing capacity, supplier support, and capacity investments.

Miles Walton requested details on Raytheon's segment growth rates, particularly for its larger Strategic Business Units (SBUs). He also asked Chairman and CEO Chris Calio about engagement with the administration following their comments and what specific behavioral changes or requests were made.

Answer

CFO Neil Mitchill stated that over half of Raytheon's sales increase comes from land and air defense systems, supported by material growth and 11 consecutive quarters of growth, with 85% of 2026 sales in backlog. Chairman and CEO Chris Calio confirmed partnership with the DoD on accelerating output, optimizing existing capacity, and identifying supplier needs and investment areas for capacity ramp-up.