RTX (RTX) Annotations

So that's a war we've been working on for a number of years. It's the 18th country to be a Patriot operator. But we see continuing demand that even is still not in the backlog. We know -- for instance, so far, we've only seen about $2 billion of awards related to Ukraine munitions replenishment. We expect that we'll see more of that coming up later this year and into next year.

But we are lockstep with Airbus on their demand for the year. And we are hand-to-mouth right now given some of the constraints. But again, lockstep with the demand, and that will continue to increase as we move into the back half of the year.

We still think Pratt's aftermarket will be up 20% to 25% year-over-year.

Obviously, as we look at the rest of the year, Noah, we expect the engine deliveries to increase. Think about between 35% and 40% year-over-year. You saw 42% in the first quarter. That will obviously come with some negative engine margin headwind. I would put a number around $250 million in terms of rest of year NEM headwind that would then, coupled with the strong aftermarket that we're expecting to continue at Pratt, you'll see that margin sort of level out as the year goes on and those engine deliveries increase.

RMD, obviously, this has been one where you're sort of trying to get to the bottom of the issues. And it sounded like it was a contract option exercise. It was 100 basis points. But even with that, you obviously have an implied 12.5% margin for the rest of the year in the guidance. So I'm just curious, what's driving that? How profitable is the backlog growth you've now built up? I think that's one of the questions that everybody has. And I know after realignment, RMD won't exist, but it will still be part of the business, obviously. Christopher Calio Hey, Myles, this is Chris. Thanks for the question. Look, agree, we'd like to be seeing the margins improving at a bit of a faster rate. But there are some real positives in this business when you step back. Most of it will be the backlog. If you think about the book-to-bill over the last 12 months, it's a 1.43, which is really phenomenal, with some key wins in some potential franchise areas. As Neil noted in his remarks, we did have a contract option exercise in the first quarter. It's a good business. Let's make no mistake about that. But because of the accounting resulted in a bit of a negative impact, about 100 basis points. If you exclude that, it would put RMD at a bit over 10%, sort of in line with where we were in Q4. As you sort of look ahead to the RMD margin profile, the two principal drivers of that margin improvement are going to be material flow and flow in our factory. And of course, just absorption brought on by higher material receipts and of course, the labor that goes with it. So if you think about the factory flow, we had a 15% increase in Q4 in terms of material sheets. Another 5% here in Q1, and we're starting to see the results in the factory. You heard Greg talk prior about kit fill rates being in the 50s. The material flow that we've seen lately has brought the kit fill rate up into the low 70s. Our historical rate is in more the mid-80s. But as we continue to drive more material, you'll see more material flow in the factories, getting those kit fill rates up. And that's going to reduce the period of performance. And then again, the second one, again, is just math. With increasing material volume in labor, we're going to see better absorption of our fixed and indirect support costs. So more productivity there. So that's the margin sort of profile and story in RMD.

RMD

RI&S

Pratt & Whitney

Collins.

First, the multi-domain command and control solutions of RIS and RMD will transition to the Mission Systems strategic business unit within Collins to create a more focused business to support connected battle space opportunities. Additionally, RIS' Air Traffic Management business will be integrated into Collins' Connected Aviation Solutions strategic business unit, further consolidating what we call the connected ecosystem of flight data and management into one business. These two moves will put Collins at the center of our company-wide collaboration efforts. They will now be responsible for more than half of our revenue synergy projects. In parallel, we will move Collins' intelligence, surveillance and reconnaissance business to the new Raytheon business unit, combining complementary sensing and imaging technologies to improve our offerings for multiple customer applications. And lastly, the new Raytheon business will merge the remaining RIS and RMD businesses into strategic business units aligned around specific customers, such as the Air Force, Army, Navy, space and missile defense. When this is complete, the top customer of each of these strategic business units will account for 70% or more of that business unit sales

Additionally, in the quarter, we achieved an incremental $50 million of gross merger cost synergies, and we are quickly approaching the $1.5 billion target, with more opportunities still ahead.

As expected, sales growth was led by commercial aerospace, with aftermarket up close to 20% and OEM shipments up close to 17% year-over-year.

Importantly, we exited the quarter with a record backlog of $180 billion. This included over $20 billion of new awards from some of our key franchises in the quarter.

On the defense side, we're very encouraged by the President's most recent fiscal year '24 budget request of $886 billion. That's up about 3%. And that's on top of last year's nearly 10% top line budget increase. The proposed budget includes broad-based support for many of our key programs, technologies and capabilities, including a request to fund multiyear munitions purchases for AMRAAM. It also prioritizes HACM, that's the Hypersonic Attack Cruise Missile, as the future long-range hypersonic missile. And perhaps most importantly for us, the budget reflects the DoD's decision to move forward with the engine core upgrade for the F135 engine, which we believe is a win for both the war fighter and the taxpayer. This program will solidify Pratt & Whitney's position on the F-35 and will provide additional thrust, range and efficiency necessary to support the needs of the war fighter well into the next decade.

With strong consumer demand and record advanced bookings, we expect total global air traffic to fully recover to 2019 levels as we exit the year.

As we look at this reorganization, this is not just about putting RIS and RMD together to recreate the old legacy Raytheon Company. We’re going to look to take the entire portfolio of RIS, Collins, RMD and move the pieces where they most appropriately aligned from a technology and a customer standpoint. So you may well see pieces, especially related to JADC2 moving into the Collins business. We’ll see how all of this evolves over the next several months. I would tell you by the time we get to the end of the first quarter, we should have a really good understanding of what the new organization is going to look like. We’ll share that with everybody at that point.

We’re going to provide an update at our upcoming Investor Day, which will be on June 19 at the Paris Air Show.

As Greg noted, our merger integration is nearly complete, having realized gross cost synergies of $1.4 billion.

RIS had a $2.9 billion of bookings in the quarter, resulting in a book-to-bill of 0.92 and a backlog of $16 billion and on a full year basis, RIS' book-to-bill was 0.96.

Now we don't have a number for you today in terms of cost savings as we are in the early stages of that analysis, but we do believe there are additional material opportunities to be realized.