Sign in
RC

RTX Corp (RTX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered robust top-line and earnings growth: sales $21.62B (+9% YoY) and adjusted EPS $1.54 (+19% YoY), with adjusted segment operating margin at 11.9% .
  • Backlog remained a major strength at $218B ($125B commercial, $93B defense), positioning RTX for continued growth into 2025; management guided to adjusted sales $83–$84B, adjusted EPS $6.00–$6.15, and free cash flow $7.0–$7.5B for FY2025 .
  • Segment trends: Pratt & Whitney momentum (OE +31% and adjusted OP +77% YoY) offset Collins OE headwinds and Raytheon divestiture impacts; Raytheon organic sales +10% ex-divestiture with mix/productivity driving margin expansion .
  • 2025 EPS walk implies margin-driven accretion partly offset by lower FAS/CAS and higher taxes; powder metal cash compensation expected at $1.1–$1.3B in 2025; GTX GTF Advantage certification targeted in 1H 2025 as a potential catalyst .
  • Wall Street consensus from S&P Global was unavailable due to data limits; company cited exceeding 2024 internal sales and EPS expectations, but external beat/miss cannot be assessed . S&P Global data unavailable.

What Went Well and What Went Wrong

What Went Well

  • Strong earnings and sales growth: Adjusted EPS $1.54 (+19% YoY) on sales $21.62B (+9% YoY); adjusted segment margins expanded to 11.9% .
  • Pratt & Whitney execution: commercial OE +31%, aftermarket +17%, military +8%; adjusted OP $717M (+77% YoY), aided by ~$70M insurance recovery .
  • Defense momentum and mix: Raytheon adjusted OP $728M (+18% YoY), with higher volume in Patriot/NASAMS/counter-UAS and favorable mix/productivity; ex-divestiture, sales +10% YoY .
  • Management confidence and demand narrative: “We have strong momentum heading into 2025 with a $218 billion backlog and unprecedented demand…” (CEO Chris Calio) . EPS/FCF growth guided for 2025 .
  • Operational productivity and AI adoption: Collins avionics software testing cycle times improved 3x using generative AI; 40 factories connected to proprietary analytics to drive utilization and quality .

What Went Wrong

  • Cash flow softness: Q4 free cash flow $492M vs $3.906B prior-year quarter; Q4 operating cash flow $1.561B vs $4.711B prior-year (working capital and timing) .
  • Collins aerospace OE and charges: Narrow-body OE weakness; $155M impairment of contract fulfillment costs; mixed OE headwinds in Collins interiors and seat certification challenges .
  • Pratt & Whitney customer bankruptcy charge: ~$157M charge in Q4; continuing powder metal-related cash costs expected in 2025 ($1.1–$1.3B) and residual into 2026 .
  • 2025 headwinds: ~$0.15 EPS headwind from lower FAS/CAS and non-service pension income; ~$0.05 higher taxes; ~$0.06 higher share count .
  • Raytheon prior divestiture weighs on headline growth; fixed price contract termination earlier in year, though Q4 performance strong operationally .

Financial Results

Consolidated Results vs prior two quarters (chronological)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$19.721 $20.089 $21.623
GAAP EPS ($)$0.08 $1.09 $1.10
Adjusted EPS ($)$1.41 $1.45 $1.54
Operating Cash Flow ($USD Billions)$2.733 $2.523 $1.561
Free Cash Flow ($USD Billions)$2.196 $1.971 $0.492
Operating Profit Margin (%)2.7% 10.1% 9.8%
Adjusted Segment Operating Margin (%)11.7% 11.4% 11.9%

Segment breakdown (Sales and Adjusted Operating Profit)

SegmentSales ($USD Billions) Q2 2024Sales ($USD Billions) Q3 2024Sales ($USD Billions) Q4 2024Adjusted OP ($USD Billions) Q2 2024Adjusted OP ($USD Billions) Q3 2024Adjusted OP ($USD Billions) Q4 2024
Collins Aerospace$6.999 $7.075 $7.537 $1.145 $1.096 $1.207
Pratt & Whitney$6.802 $7.239 $7.569 $0.537 $0.597 $0.717
Raytheon$6.581 (Adjusted) $6.386 $7.157 $0.709 $0.661 $0.728

KPIs and operational metrics

KPIQ3 2024Q4 2024
Company Backlog ($USD Billions)$221 (Commercial $131; Defense $90) $218 (Commercial $125; Defense $93)
Raytheon Bookings ($USD Billions)$16.6 in Q3 (backlog $60) $9.5 in Q4 (backlog $63)
Pratt & Whitney Awards/Bookings$11B awards in Q3 $8.9B awards in Q4; incl. $1.4B F135 sustainment
Capital Returned ($USD Billions)$1.1 in Q3 $0.852 in Q4
Capex ($USD Billions)$0.552 in Q3 $1.069 in Q4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Sales ($USD Billions)FY 2025N/A$83.0–$84.0New guidance provided
Adjusted EPS ($)FY 2025N/A$6.00–$6.15New guidance provided
Free Cash Flow ($USD Billions)FY 2025N/A$7.0–$7.5New guidance provided
Powder Metal Cash Compensation ($USD Billions)FY 2025N/A$1.1–$1.3New guidance provided
Collins Adjusted OP Growth ($USD Millions)FY 2025N/A+$500–$600; ~($80) headwind from actuation divestitureNew guidance provided
Pratt Adjusted OP Growth ($USD Millions)FY 2025N/A+$325–$400New guidance provided
Raytheon Adjusted OP Growth ($USD Millions)FY 2025N/A+$150–$225; ~$35M headwind from CIS saleNew guidance provided
EPS Walk Components ($)FY 2025N/A+$0.66 Segment OP; +$0.05 lower interest; −$0.15 FAS/CAS & pension; −$0.06 shares; −$0.16 other (incl. +$0.06 corporate, +$0.05 taxes)Detailed bridge
Collins Actuation Divestiture AssumptionFY 2025N/AClose by end of Q2 2025Assumption

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
AI/Technology initiatives30+ AI use cases added; 200 deployed; Industry 4.0 factory connectivity expanding 34 factories connected; 40 target; digital modernization; productivity initiatives Generative AI cut avionics software testing cycle times 3x; 40 top factories connected Expanding AI and digital operating system deployment
Supply chain & productivityStructural castings/forgings ramp; MRO throughput up; productivity programs across segments Boeing-related narrow-body OE disruption; productivity improvement at Raytheon; backlog execution emphasis Casting/forging improvements; embedded teams at key suppliers; focus on rocket motors; interiors ramp/heat exchangers recovery Improving but still key execution focus
Macro/Defense demandRobust defense bookings (Patriot, SM-3, AMRAAM); backlog growth Record bookings, backlog $221B; international mix rising to 44% Continued strength in integrated air & missile defense; U.S. replenishment; NATO >2% spend; international tailwind Sustained strong demand mix, more international
Product performance (Pratt)OE +33%; aftermarket +15%; military +16%; GTF ramp and MRO Large commercial engine mix favorable; 20% military growth; V2500 shop visits steady (~800) OE +31%; aftermarket +17%; military +8%; insurance recovery; GTFA certification target 1H 2025 Healthy across channels; GTFA certification catalyst
Regulatory/LegalAccruals for legacy legal matters; DOJ/SEC/DOS resolutions expected; impact to cash Continuing to manage legacy matters; tax settlements benefits 2025 cash tailwind from 2024 one-time legal/contract payments not repeating Legacy matters being resolved; cash normalization expected
R&D execution~$7.5B company/customer-funded R&D; hybrid-electric demonstrators; GN radar advances NGAP development; F135 core upgrade; Oklahoma City sustainment facility Continued ~$7.5B R&D; rapid product cycles (e.g., Coyote); GTFA testing completed requirements Sustained investment in next-gen tech

Management Commentary

  • “RTX delivered a very strong year of performance in 2024… segment margin expansion in all three businesses.” — Chris Calio (CEO) .
  • “We expect full year 2025 adjusted sales to be between $83 billion and $84 billion… adjusted EPS of between $6 and $6.15… free cash flow… $7 billion to $7.5 billion.” — Chris Calio (CEO) .
  • “Adjusted sales of $21.6 billion were up 9% and up 11% organically… Adjusted EPS of $1.54 was up 19%.” — Neil Mitchill (CFO) .
  • “Using generative AI, Collins’ avionics business has seen software testing cycle times improve by 3x…” — Chris Calio (CEO) .
  • “Raytheon… adjusted operating profit of $728 million was up 18% versus the prior year… Excluding the impact of the divestiture, sales were up 10% versus the prior year.” — Press release .

Q&A Highlights

  • Powder metal cash profile and AOG outlook: 2025 compensation $1.1–$1.3B; residual parked in 2026; MRO output targeted >30% growth to bend AOG curve; supply chain parts (isothermal forgings, structural castings) ramping .
  • Defense outlook amid new administration: strong international demand (Europe IAMDS, Asia-Pacific naval munitions); Raytheon backlog $63B with 44% international mix .
  • OEM rate assumptions and Collins guidance: Collins OEM outlook prudently calibrated due to channel inventory and narrow-body specifics; Pratt large engine unit deliveries ~+14% again in 2025; mix headwinds expected .
  • Aftermarket margins: GTF aftermarket margins “near double digits” and improving; expected ~$500M drop-through from Pratt aftermarket in 2025; negative engine margin headwind $150–$200M as OE volumes rise .
  • FAS/CAS and pension: 2025 EPS headwind ~$0.15; plans remain well funded (104% funded status) with de-risking path reducing income over time .
  • Working capital/FCF normalization: ~$1.3B working capital improvement expected in 2025; operational baseline ~ $8.4B OCF excluding powder metal .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q4 2024 were unavailable due to data access limits; therefore, beat/miss vs external consensus cannot be determined. Company stated Q4 adjusted sales and EPS were ahead of internal expectations, driven primarily by Pratt OE . S&P Global data unavailable.

Key Takeaways for Investors

  • Backlog strength and broad-based demand (commercial and defense) support 2025 top-line growth and margin expansion; focus remains on execution and supply chain throughput .
  • Pratt & Whitney is the near-term earnings engine (OE/aftermarket/military) with GTFA certification (1H 2025) a potential catalyst; monitor powder metal cash timeline and aftermarket margin progression .
  • Raytheon’s mix/productivity improvements and international backlog share (44%) drive sustained margin expansion; watch rocket motor supply chain and development program mix .
  • Collins aftermarket momentum offsets narrow-body OE variability; interiors/seat certification and heat exchanger recovery are execution watch-items; cost actions and centers of excellence underpin margin runway .
  • Cash flow set to improve in 2025 on working capital and non-recurring items not repeating; however, EPS faces headwinds from lower pension/FAS-CAS income and taxes—trade the margin momentum vs these offsets .
  • Capital returns remain a pillar; management has line-of-sight to the high end of $36–$37B cumulative post-merger commitment by end-2025 .
  • Near-term narrative drivers: GTFA certification, Collins actuation divestiture closure, defense bookings conversion to revenue, and execution on MRO throughput/AOG reduction .
Notes:
- All financial data and management commentary sourced from RTX’s Q4 2024 8-K press release and exhibits, Q4 2024 earnings call transcript, and prior quarter press releases/transcripts as cited.