Sign in
RC

RTX Corp (RTX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue $22.48B (+12% YoY; +4% QoQ) and adjusted EPS $1.70 (+17% YoY) on broad-based strength in commercial aftermarket and defense; GAAP EPS $1.41 included $0.29 per share acquisition accounting adjustments .
  • RTX raised FY25 adjusted sales to $86.5–$87.0B (from $84.75–$85.5B) and adjusted EPS to $6.10–$6.20 (from $5.80–$5.95); FCF maintained at $7.0–$7.5B .
  • Backlog grew to $251B (commercial $148B; defense $103B); Q3 new awards $37B; Raytheon bookings $15.9B with book-to-bill 2.27 and record $72B backlog, highlighting accelerating defense demand .
  • Cash flow re-accelerated: Q3 operating cash flow $4.64B and FCF $4.03B, aided by collections and advances; debt paydown of $2.9B and $0.9B returned via dividends; Board declared $0.68 per share dividend payable Dec 11, 2025 .
  • Estimates beat: Adjusted EPS $1.70 vs S&P Global consensus ~$1.41; revenue $22.48B vs ~$21.32B; guidance raise and defense order momentum were the likely stock catalysts this quarter *.

What Went Well and What Went Wrong

What Went Well

  • “Double-digit organic sales growth across all three segments and our sixth consecutive quarter of year-over-year adjusted segment margin expansion” with Q3 adjusted segment margin at 12.1% (+70 bps YoY) .
  • Commercial aftermarket remained robust: Collins aftermarket +13% and Pratt aftermarket +23% YoY; Pratt military +15% on F135 Lot 18 award, driving profit growth .
  • Defense momentum: Raytheon sales +10% and adjusted operating profit +30% YoY on favorable mix (International Patriot) and productivity; bookings $15.9B, book-to-bill 2.27, backlog $72B .
  • Quote: “Based on our year-to-date performance and ongoing demand strength, we are raising our full year outlook for adjusted sales and EPS.” — Chris Calio, CEO .

What Went Wrong

  • Tariffs were a meaningful headwind: ~$90M headwind each at Collins and Pratt in Q3; management is pursuing mitigations but expects similar headwinds in Q4 .
  • Pratt negative engine margin persists: management reiterated a $150–$200M 2025 headwind with OE step-up creating mix headwinds even as MRO accelerates .
  • Q2 work stoppage at Pratt impacted cash flow timing (context for sequential rebuild); management cited non-repeating Q3 tax benefits ($0.12 EPS) and higher Q4 ETR .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$20.31 $21.58 $22.48
GAAP Diluted EPS ($)$1.14 $1.22 $1.41
Adjusted Diluted EPS ($)$1.47 $1.56 $1.70
Adjusted Segment Operating Margin (%)11.9% 12.0% 12.1%
Operating Cash Flow ($USD Billions)$1.31 $0.46 $4.64
Free Cash Flow ($USD Billions)$0.79 $(0.07) $4.03

Segment performance (Q3 2025):

SegmentSales ($USD Millions)YoY %Adjusted Operating Profit ($USD Millions)YoY %Adjusted ROS (%)
Collins Aerospace$7,621 +8% $1,194 +9% 15.7%
Pratt & Whitney$8,423 +16% $751 +26% 8.9%
Raytheon$7,045 +10% $859 +30% 12.2%

Estimates comparison (Q3 2025):

MetricConsensusActual
Adjusted EPS ($)1.41*1.70
Revenue ($USD Billions)21.32*22.48
# EPS Estimates16*—
# Revenue Estimates15*—

Values retrieved from S&P Global.*

KPIs (Q3 2025):

KPIQ3 2025
Backlog ($USD Billions)$251 ($148 commercial; $103 defense)
New awards ($USD Billions)$37
Capital returned ($USD Billions)$0.9 via dividends
Debt repaid ($USD Billions)$2.9
Raytheon Q3 bookings ($USD Billions)$15.9; book-to-bill 2.27; backlog $72

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Sales ($USD Billions)FY 2025$84.75–$85.5 $86.5–$87.0 Raised
Organic Sales Growth (%)FY 20256–7% 8–9% Raised
Adjusted EPS ($)FY 2025$5.80–$5.95 $6.10–$6.20 Raised
Free Cash Flow ($USD Billions)FY 2025$7.0–$7.5 $7.0–$7.5 Maintained
Collins Operating Profit Growth vs 2024 ($USD Millions)FY 2025$275–$350 $325–$375 Raised
Pratt Operating Profit Growth vs 2024 ($USD Millions)FY 2025$200–$275 $350–$400 Raised
Raytheon Operating Profit Growth vs 2024 ($USD Millions)FY 2025$225–$300 $400–$450 Raised
Dividend per Share ($)Q4 2025 payout—$0.68 payable Dec 11, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2025)Trend
Tariffs/macroQ1 outlook excluded impact of new tariffs; mgmt to assess . Q2 outlook revised to incorporate tariff impacts .~$90M tariff headwind at Collins and Pratt in Q3; mitigations ongoing; net tariff headwind unchanged in FY outlook .Headwind recognized; mitigation progressing.
Supply chain & MRO rampQ2 Pratt work stoppage impacted cash flow timing .GTF MRO output targeted +30% YoY; record gate restarts; value-stream material flow improving (forgings +16%, castings +29%) .Improving throughput; supports AOG reduction.
Defense demand & mixQ2 Raytheon growth led by Patriot/NASAMS; adjusted OP +14% .Raytheon adjusted OP +30%; bookings $15.9B, B/B 2.27, backlog $72B; mix tailwind from International Patriot .Accelerating, mix favorable.
Commercial OE & aftermarketQ1 aftermarket +21%, OE modest increase . Q2 aftermarket +16%, OE +15 at Pratt .Collins aftermarket +13%; Pratt aftermarket +23%; OE step-up continues at Pratt with mix headwind near term .Aftermarket strength sustained; OE ramp ongoing.
AI/technology initiatives—Data analytics and AI tools deployed to improve munitions output and reduce rework (AMRAAM) .Increasing use of AI for productivity.
R&D executionLower R&D supported Collins and Pratt margins in Q1/Q2 .Lower R&D at Collins aided margins; Pratt profit growth despite higher SG&A .Continued leverage and reallocation.
Regulatory/legal itemsPrior-year legal matters resolved (non-GAAP adjustments) .No new items; safe-harbor reiterated .Stable.

Management Commentary

  • “We also received $37 billion of new awards in the quarter, reflecting robust global demand for our products and supporting long-term growth for RTX.” — Chris Calio, CEO .
  • “Adjusted sales of $22.5 billion were up 12%... Adjusted EPS of $1.70 up 17%... Free cash flow was very strong at $4 billion, driven by working capital improvement... we paid down $2.9 billion of debt.” — Neil Mitchill, CFO .
  • “We continue to develop and deploy our data analytics and AI tools... AMRAAM output more than doubling year to date through Q3.” — Management prepared remarks .
  • “International backlog [Raytheon] now sits at about 44%... the mix supports expanding margin.” — CFO on margin trajectory .

Q&A Highlights

  • GTF MRO ramp: Management reiterated ~30% 2025 MRO output growth; record gate restarts; improving materials flow and repair network throughput; 110-day TAT on heavier work scopes .
  • Tariffs: ~$90M headwind at Collins and Pratt in Q3; Q4 headwinds expected; mitigation via USMCA qualification, bond strategies, and pricing .
  • Pratt OE/negative engine margin: 2025 headwind maintained at $150–$200M; OE deliveries rising; aftermarket mix (GTF vs V2500) differentiates profit .
  • Raytheon growth constraints: Demand is not the limiter; supply chain capacity (microelectronics, rocket motors) is the gating factor; $300M 2025 capex to expand capacity (e.g., Redstone facility) .
  • Capital deployment: Debt reduction remains priority; dividend growth with earnings; baseline FCF implied at $8.0–$8.5B excluding powder metal payments .

Estimates Context

  • Q3 beats: Adjusted EPS $1.70 vs S&P Global consensus ~$1.41 (+$0.29); revenue $22.48B vs ~$21.32B (+$1.16B) *.
  • Estimate base: 16 EPS estimates and 15 revenue estimates for Q3 [GetEstimates]*.
  • Implications: Guidance increase (sales, EPS) suggests upward revisions to FY25 street models; tariff headwinds and OE mix at Pratt temper near-term margin expansion, but defense mix/productivity at Raytheon should support estimate raises in that segment .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Broad-based growth with sustained aftermarket strength and accelerating defense demand; Q3 adjusted EPS beat and FY25 guidance raise underpin estimate momentum *.
  • Defense mix and productivity at Raytheon are driving margin expansion; international backlog at 44% and Patriot programs key tailwinds .
  • Pratt’s OE ramp continues while aftermarket remains strong; watch negative engine margin drag and tariff headwinds in Q4 before margin expansion resumes .
  • Cash generation re-accelerated; FCF on track ($7.0–$7.5B) with baseline FCF trajectory of ~$8.0–$8.5B beyond powder-metal compensation .
  • Capital allocation tilting to deleveraging near term; dividend declared at $0.68 supports income profile while preserving flexibility for defense capacity investments .
  • Operational execution across supply chains (forgings/castings) and AI-enabled productivity are concrete levers for throughput and margin enhancement .
  • Near-term trading: Positive reaction bias on beats/raises; monitor Q4 ETR normalization, tariff impact cadence, and any GTF MRO execution updates in January outlook .

Note: All non-GAAP measures and reconciliations are per RTX disclosures; GAAP-to-non-GAAP adjustments include acquisition accounting, restructuring, and significant/non-recurring items as detailed in the 8-K exhibits .