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RTX Corp (RTX)·Q1 2025 Earnings Summary

Executive Summary

  • RTX delivered a clean top-line and EPS beat: revenue $20.31B vs $19.80B consensus and adjusted EPS $1.47 vs $1.37 consensus; organic sales +8% YoY, driven by +21% commercial aftermarket and 120 bps of segment margin expansion (11.9%) in Q1 2025 . Consensus values marked with * retrieved from S&P Global.
  • Sequentially softer vs Q4 on seasonality (rev $21.62B, adj EPS $1.54), but YoY momentum intact (rev +5%, adj EPS +10%) with strong Collins/Pratt performance and Raytheon mix/pricing tailwinds .
  • FY25 outlook reaffirmed (sales $83–84B, adj EPS $6.00–$6.15, FCF $7.0–$7.5B), explicitly excluding newly enacted tariffs; management quantified a potential ~$850M pretax direct tariff headwind net of mitigations (back-half weighted) with 15–20% larger cash impact if fully effective in 2025 .
  • Backlog remains robust at $217B ($125B commercial/$92B defense), with Raytheon bookings at $4.4B in the quarter (book-to-bill 0.7; rolling 12-month 1.35) setting up multi-year visibility; dividend raised 7.9% to $0.68/shr post-quarter, reinforcing capital returns .

What Went Well and What Went Wrong

What Went Well

  • Broad-based organic growth and margin expansion: organic sales +8% YoY; adjusted segment OP margin +120 bps to 11.9%; adjusted EPS +10% YoY to $1.47, aided by drop-through from commercial aftermarket and defense .
  • Collins and Pratt outperformed: Collins sales +8% with adj ROS 17.0% (commercial aftermarket +13%, defense +10%); Pratt sales +14% with adj ROS 8.0% (commercial aftermarket +28%) .
  • Strategic progress on key franchises: FAA certification for GTF Advantage (targeting up to 2x time-on-wing vs current engine; 90–95% of durability upgrades to be available via MRO package in 2026), and LTAMDS transitioned into production and deployment phase .
    • “We generated 8% organic sales growth... and we generated strong free cash flow...,” CEO Chris Calio noted, underscoring execution in a “highly dynamic operating environment” .

What Went Wrong

  • Raytheon reported sales -5% YoY due to the prior-year cybersecurity divestiture (organic +2%); reported OP down on lapping a $375M divestiture gain, although adjusted OP rose +8% on mix/productivity .
  • Higher tax rate and tariff uncertainty: adjusted ETR rose to 19.3% from 16.6% YoY, and FY25 outlook excludes tariffs; management framed a potential ~$850M net pretax tariff impact if current regimes persist .
  • Sequential seasonality: revenue and adjusted EPS stepped down from Q4 2024 (rev $21.62B; adj EPS $1.54) to Q1 2025 (rev $20.31B; adj EPS $1.47), though YoY trends remain positive .

Financial Results

Consolidated results vs prior year, prior quarter, and estimates

MetricQ1 2024Q4 2024Q1 2025Consensus Q1 2025*
Revenue ($B)$19.31 $21.62 $20.31 $19.80*
GAAP EPS$1.28 $1.10 $1.14 —
Adjusted EPS$1.34 $1.54 $1.47 $1.37*
Operating Profit ($B)$1.87 $2.11 $2.04 —
Operating Margin (%)9.7% 9.8% 10.0% —
Operating Cash Flow ($B)$0.34 $1.56 $1.31 —
Free Cash Flow ($B)$(0.13) $0.49 $0.79 —

Consensus values marked with * retrieved from S&P Global.

Q1 2025 surprise: Revenue beat by ~$0.51B; Adjusted EPS beat by ~$0.10 vs S&P Global consensus* .

Segment performance (Adjusted, YoY)

SegmentMetricQ1 2024Q1 2025
Collins AerospaceSales ($B)$6.67 $7.22
Adj Operating Profit ($B)$1.05 $1.23
Adj ROS (%)15.7% 17.0%
Pratt & WhitneySales ($B)$6.46 $7.37
Adj Operating Profit ($B)$0.43 $0.59
Adj ROS (%)6.7% 8.0%
RaytheonSales ($B)$6.66 $6.34
Adj Operating Profit ($B)$0.63 $0.68
Adj ROS (%)9.5% 10.7%

KPIs and operating highlights

KPIQ1 2024Q1 2025Notes
Organic Sales Growth YoY—+8% Ex-divestitures/FX
Commercial Aftermarket YoY—+21% Broad-based strength
Company Backlog—$217B $125B commercial/$92B defense
Raytheon Bookings—$4.4B Book-to-bill 0.7; R12M 1.35
Segment OP Margin (Adj)10.7% 11.9% +120 bps YoY
Operating Cash Flow$0.34B $1.31B +$0.96B YoY
Free Cash Flow$(0.13)B $0.79B Turned positive
Capital Returned—$0.9B Primarily dividends

Guidance Changes

MetricPeriodPrevious (Jan 28, 2025)Current (Apr 22, 2025)Change
Adjusted SalesFY 2025$83.0–$84.0B $83.0–$84.0B Maintained
Adjusted EPSFY 2025$6.00–$6.15 $6.00–$6.15 Maintained
Free Cash FlowFY 2025$7.0–$7.5B $7.0–$7.5B Maintained
Collins Adj OP growthFY 2025+$500–$600M vs 2024 +$500–$600M vs 2024 Maintained
Pratt Adj OP growthFY 2025+$325–$400M vs 2024 +$325–$400M vs 2024 Maintained
Raytheon Adj OP growthFY 2025+$150–$225M vs 2024 +$150–$225M vs 2024 Maintained
Tariff impacts in outlookFY 2025Excluded Excluded; potential ~$850M pretax direct if in place full year Clarified quantification
Quarterly dividendQ2 2025 pay—Increased to $0.68/shr (+7.9%) Raised

Note: Management quantified potential net pretax tariff impacts (Canada/Mexico ~$250M; China ~$250M; Rest-of-world ~$300M; steel/aluminum ~$50M), largely back-half weighted; cash impact assumed 15–20% larger due to timing .

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
AI/Technology & ProductivityDigital/AI use cases; 34 connected factories; productivity initiatives across Raytheon/Collins Plan to deploy 40 AI use cases; 40 factories connected; Industry 4.0 to boost cycle times/utilization Continued productivity focus; cost transformation and margin expansion across segments Improving execution
GTF programMRO throughput +27% YoY; agreements covering ~75% PW1100 fleet MRO output +30% in 2024; >30% growth planned for 2025; powder metal cash $1.1–$1.3B in 2025 PW1100 MRO +35% YoY; FAA certification for GTF Advantage; durability upgrades roll into fleet Scaling recovery; tech upgrade
Supply chainMaterial receipts growth; addressing rocket motors, castings, heat exchangers Capacity investments (e.g., OKC facility); continued supplier embedding Stability improving; SPS fire manageable; 8 consecutive quarters of material growth at Raytheon Gradual normalization
Tariffs/MacroNot a focusOutlook excludes tariffs; FY25 framed with macro uncertainty Detailed $850M net pretax tariff exposure; mitigations (duty drawback, FTZ, pricing) New risk overhang
Defense demand (EU/US)Record bookings; backlog +; international mix rising Strong Raytheon backlog ($63B); international 44% EU rearmament a visible multi-year driver (Patriot, LTAMDS, NASAMS, Coyote); expect ≥1.0 B2B at RTX Defense in 2025 Structural tailwind

Management Commentary

  • “We are off to a strong start to 2025 with 8 percent organic sales growth and 10 percent adjusted EPS growth, including 120 basis points of segment margin expansion in Q1,” said CEO Chris Calio, citing 21% growth in commercial aftermarket .
  • On tariffs, CFO Neil Mitchill: “We estimate… a cost impact of around $250 million [USMCA],… $250 million [China],… $300 million [rest of world at 10%], and… $50 million on steel and aluminum,” net of mitigations; impact back-half weighted with 15–20% larger cash drag .
  • Strategic readiness: “LTAMDS… will now transition into the production and deployment phase… followed by deliveries to European customers,” and GTF Advantage certification achieved; durability upgrades to be integrated into MRO .
  • Demand backdrop: Backlog $217B (+8% YoY) with $125B commercial/$92B defense; EU defense spend push cited as opportunity for Raytheon in integrated air and missile defense .

Q&A Highlights

  • Tariffs: $850M net pretax direct exposure if current regimes persist; mitigations include duty drawback, FTZs, contractual pricing; cash impact 15–20% larger; segment exposure minimal at Raytheon ($0.01 EPS), remainder split roughly evenly between Collins and Pratt .
  • Defense outlook: EU rearmament and international mix seen as multi-year demand driver; expect Raytheon book-to-bill ≥1.0 for 2025 .
  • Pratt aftermarket: V2500 ~800 shop visits in 2025, trending toward heavier overhauls; GTF MRO throughput improving with focus on Gate 2 material flow; aftermarket margins near double-digits and improving .
  • Supply chain/SPS fire: RTX working with SPS and alternate suppliers; no notable operational impact anticipated .
  • Margins: Raytheon FY guide implies ~10.5% ROS with ~$100M productivity; mix shift to international aiding margin trajectory .

Estimates Context

  • Q1 2025 actuals vs S&P Global consensus*: Revenue $20.31B vs $19.80B; Adjusted EPS $1.47 vs $1.37 .
  • With stronger aftermarket and 120 bps segment margin expansion, estimates for FY25 segment profit growth (Collins/Pratt/Raytheon) appear achievable barring tariff pass-through/mitigation slippage . Consensus values marked with * retrieved from S&P Global.
MetricConsensus* Q1 2025Actual Q1 2025Surprise
Revenue ($B)19.8020.31 +0.51
Adjusted EPS ($)1.371.47 +0.10

Consensus values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Positive print: clear top- and bottom-line beats with broad-based organic growth and margin expansion; aftermarket strength remains the flywheel .
  • Outlook intact: FY25 sales/EPS/FCF maintained; execution confidence remains high across Collins/Pratt/Raytheon segment profit growth targets .
  • Tariff overhang quantified: ~$850M pretax (net) sensitivity and back-half cash drag framework provided; monitoring mitigations and price realization is key for FY25 EPS risk calibration .
  • Defense momentum: International demand (EU) for IAMD (Patriot, LTAMDS, NASAMS) and effectors supports multi-year revenue/mix tailwinds at Raytheon; watch bookings conversion cadence .
  • Pratt inflection: GTF Advantage certification and MRO throughput gains underpin improving aftermarket margin/cash trajectories through 2025–26 .
  • Cash and returns: Q1 FCF of ~$0.8B; FY25 FCF guide $7.0–$7.5B intact; dividend raised 7.9% to $0.68/shr supports yield case .
  • Trading setup: Beat-and-raise absent (guide maintained), but solid execution plus visible backlog may support multiple; tariff clarity and back-half cadence are near-term stock drivers .

Appendix: Non-GAAP considerations

  • Adjusted EPS excludes $0.27 acquisition accounting adjustments and $0.06 restructuring/other items; adjusted ETR rose to 19.3% (vs 16.6% LY) .
  • Free cash flow defined as OCF less capex; Q1 FCF $0.79B (OCF $1.31B; capex $0.51B) .