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RTX Corp (RTX)·Q2 2025 Earnings Summary

Executive Summary

  • RTX delivered a broad-based beat in Q2 2025: revenue $21.58B (+9% y/y) and adjusted EPS $1.56 (+11% y/y), with consolidated segment margin up 30 bps; backlog rose to $236B and Q2 book-to-bill was 1.86 .
  • Versus Wall Street consensus (S&P Global), RTX beat on both adjusted EPS ($1.56 vs $1.425*) and revenue ($21.58B vs $20.63B*); EBITDA also exceeded consensus ($3.57B vs $3.25B*) .
  • Guidance was mixed: adjusted sales raised to $84.75–$85.5B (from $83–$84B), organic growth raised to 6–7% (from 4–6%), adjusted EPS lowered to $5.80–$5.95 (from $6.00–$6.15), FCF maintained at $7.0–$7.5B; dividend was raised 8% .
  • Tariffs and the four-week Pratt & Whitney work stoppage weighed on cash and profitability (Q2 FCF −$0.07B); management cut 2025 tariff cost assumptions to ~$500M (cash ~$600M) and outlined mitigations (USMCA, duty-free, FTZ, pricing) .
  • Near-term stock catalysts: sales/growth outlook raise and defense demand strength vs EPS guidance cut from tariffs; execution on Pratt MRO output (target ~30% full-year increase) to reduce GTF AOGs in 2H .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and profit growth: Q2 revenue $21.58B (+9% y/y), adjusted EPS $1.56 (+11% y/y), segment operating profit +12% y/y; consolidated adjusted segment margin expanded to 12.0% .
  • Defense momentum and mix benefits: Raytheon adjusted operating profit up 14% y/y to $0.81B on favorable program mix (International Patriot, NASAMS, SPY‑6/ESSM) .
  • Backlog and orders strength: backlog reached $236B (+15% y/y), Q2 book‑to‑bill 1.86; notable wins included >1,000 GTF engine orders and >$5B of integrated air/missile defense awards .

Quotes:

  • “We continued our momentum in the second quarter with organic sales and profit growth across all three segments, including 16 percent commercial aftermarket growth.” — Chris Calio .
  • “Our updated outlook reflects strong operational performance in the first half and incorporates our current assessment of the impact of tariffs.” — Chris Calio .

What Went Wrong

  • Tariffs and work stoppage pressured cash/EPS: Q2 FCF −$0.072B and OCF $0.458B, impacted by Pratt’s four‑week work stoppage and tariff cost embedded in EPS (~$0.06) .
  • Pratt reported margin pressure: reported operating profit down 9% y/y to $0.49B, including a ~$100M charge from a customer bankruptcy; adjusted OP rose but tariffs/work stoppage weighed .
  • Collins ROS mix headwind: reported ROS fell 60 bps y/y to 15.4% on unfavorable commercial OE mix and tariff headwinds, though adjusted ROS held at 16.4% .

Financial Results

Consolidated Results by Quarter

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$21.62 $20.31 $21.58
GAAP EPS ($)$1.10 $1.14 $1.22
Adjusted EPS ($)$1.54 $1.47 $1.56
Operating Profit Margin (%)9.8% 10.0% 9.9%
Adjusted Segment Operating Profit Margin (%)11.9% 11.9% 12.0%

Q2 2025 Actual vs Consensus (S&P Global)

MetricQ2 2025 ActualQ2 2025 Consensus
Revenue ($USD Billions)$21.58 $20.63*
Adjusted EPS ($)$1.56 $1.425*
EBITDA ($USD Billions)$3.57*$3.25*
EPS – # of Estimates—19*
Revenue – # of Estimates—16*

*Values retrieved from S&P Global.

Segment Breakdown (Sales, Adjusted Operating Profit, Adjusted ROS)

SegmentQ4 2024 Sales ($B)Q4 2024 Adj OP ($B)Q4 2024 Adj ROS (%)Q1 2025 Sales ($B)Q1 2025 Adj OP ($B)Q1 2025 Adj ROS (%)Q2 2025 Sales ($B)Q2 2025 Adj OP ($B)Q2 2025 Adj ROS (%)
Collins Aerospace$7.54 $1.21 16.0% $7.22 $1.23 17.0% $7.62 $1.25 16.4%
Pratt & Whitney$7.57 $0.72 9.5% $7.37 $0.59 8.0% $7.63 $0.61 8.0%
Raytheon$7.16 $0.73 10.2% $6.34 $0.68 10.7% $7.00 $0.81 11.6%

KPIs

KPIQ4 2024Q1 2025Q2 2025
Backlog ($USD Billions)$218 $217 $236
Book-to-Bill (Company)——1.86
Operating Cash Flow ($USD Billions)$1.56 $1.31 $0.46
Free Cash Flow ($USD Billions)$0.49 $0.79 −$0.07
Dividend Change (%)——+8%
Capital Returned ($USD Billions)$0.85 $0.90 $0.90

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Sales ($B)FY 2025$83.0–$84.0 $84.75–$85.5 Raised
Organic Sales Growth (%)FY 20254–6% 6–7% Raised
Adjusted EPS ($)FY 2025$6.00–$6.15 $5.80–$5.95 Lowered
Free Cash Flow ($B)FY 2025$7.0–$7.5 $7.0–$7.5 Maintained
Effective Tax Rate (%)FY 2025—~19.5% New detail
Collins OP growth vs 2024 ($M)FY 2025+$500–$600 +$275–$350 Lowered
Pratt OP growth vs 2024 ($M)FY 2025+$325–$400 +$200–$275 Lowered
Raytheon OP growth vs 2024 ($M)FY 2025+$150–$225 +$225–$300 Raised
Commercial Aftermarket growthFY 2025~10% (prior) Low teens Raised
Commercial OE growthFY 2025Mid‑single digits High single digits Raised
Defense sales growthFY 2025Mid‑single digits Mid‑single digits Maintained
Tariff cost assumption ($M)FY 2025~$850 ~$500 (cash ~$600) Lowered
DividendFY 2025—+8% increase Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prev. Mentions)Q1 2025 (Prev. Mentions)Q2 2025 (Current)Trend
Tariffs/macroLegal and tax items drove volatility; no tariff detail Outlook excluded incremental tariffs; planned to detail impacts Tariff cost cut to ~$500M; mitigations (USMCA, duty-free, FTZ, pricing); EPS impact ~$0.06 in Q2 Improving mitigation
Supply chain capacityRestart and ramps in defense programs; mix benefits Segment margin expansion; aftermarket strength Pratt MRO output +22% q/q despite strike; structural castings +20%; reduced Collins overdue line items (~25%) Improving throughput
AI/technology initiativesProduct/program wins; portfolio focus —Shield AI partnership; GhostEye with Kongsberg; cross‑company analytics/AI platform for productivity Accelerating initiatives
Defense demand (Patriot/NASAMS)Strong bookings; FMS/DCS mix uplift LTAMDS highlighted; defense up organically >$5B IAMD awards; AIM‑9X $1.1B; Europe/NATO spend tailwinds; Raytheon mix drives margin Strengthening
FAA modernization——$12.5B reconciliation funding; Collins radar/automation opportunities Emerging opportunity
GTF fleet managementPowder metal matter legacy in 2023 Aftermarket +21%; Pratt margin up; program mix Target ~30% MRR output increase 2025; Hot Section Plus to deliver 90–95% of Advantage durability; AOGs to decline meaningfully 2H Improving execution

Management Commentary

  • Strategic priorities: “Autonomy and AI are significant parts of our RTX cross‑company technology roadmap… partnership with Shield AI to integrate AI‑based sensor and target recognition capabilities into select RTX products.” — Chris Calio .
  • Backlog/demand: “We have great momentum… $1.86 book‑to‑bill in the quarter, and our backlog now stands at $236 billion.” — Chris Calio .
  • Tariff stance: “Our current assessment of 2025 tariff costs net of mitigations is around $500 million… associated cash impact around $600 million.” — Neil Mitchill .
  • Capital allocation: “We raised our dividend by 8% in the quarter… expect to deliver $37 billion of capital to share owners from the date of the merger through the end of this year.” — Chris Calio .

Q&A Highlights

  • Tariffs: Initial outlook cut from ~$850M to ~$500M due to reduced rates/pauses and mitigations; cash outflow YTD ~$175M with ~$425M to go; segment split $275M Collins/$225M Pratt .
  • Pratt aftermarket/MRO: MRO output +22% in Q2 despite strike; V2500 shop visits (~800 for 2025) performing well with heavier workscopes; aftermarket growth mid‑teens for FY .
  • Raytheon margins: Mix shift to higher‑margin foreign FMS/DCS, improved base margins and productivity underpin path to 12%+ over time .
  • FAA modernization: $12.5B funding seen as down payment; Collins radar/automation/equipment packages well‑positioned .
  • GTF Hot Section Plus: Customer‑by‑customer economics; expected 90–95% of Advantage time‑on‑wing benefit; prudent margin booking with potential later EAC benefits .

Estimates Context

  • Q2 2025 beats: Adjusted EPS $1.56 vs $1.425*; revenue $21.58B vs $20.63B*; EBITDA $3.57B vs $3.25B*; 19 EPS estimates, 16 revenue estimates .
  • Implications: Consensus likely to lift sales and defense mix assumptions; EPS revisions may remain constrained near‑term by tariff costs despite mitigation progress .

*Values retrieved from S&P Global.

Detailed Beats/Misses Table

MetricQ2 2025 ActualQ2 2025 ConsensusSurprise
Revenue ($USD Billions)$21.58 $20.63*+$0.95B (Beat)
Adjusted EPS ($)$1.56 $1.425*+$0.135 (Beat)
EBITDA ($USD Billions)$3.57*$3.25*+$0.32B (Beat)

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Broad-based beat with raised sales/organic growth outlook but lowered EPS guidance due to tariffs; focus near‑term on tariff developments and mitigation execution .
  • Defense strength and mix are durable tailwinds (International Patriot/NASAMS/SPY‑6/ESSM), supporting Raytheon margin trajectory and backlog conversion .
  • Pratt margins should expand medium term as OE ramps and aftermarket remains strong; near‑term watch AOG reductions and MRO output cadence (~30% 2025 target) .
  • Collins remains a margin anchor despite tariff/OE mix headwinds; adjusted ROS steady at 16.4% with defense/aftermarket offset .
  • Cash inflection expected in 2H from strike recovery, receivables collection, Pratt F‑135 awards, and international advances; FY FCF guide maintained .
  • Dividend up 8% and continued capital return underscore confidence; portfolio streamlining (Collins divestitures) supports focus on core platforms .
  • Trading lens: Strong demand narrative and backlog/book‑to‑bill support the bull case; EPS guide cut is the offset—monitor tariff policy paths and subsequent estimate revisions .