RTX - Earnings call transcript Q4 2024

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Operator

Good day, ladies and gentlemen, and welcome to the RTX Fourth Quarter 2024 Earnings Conference Call. My name is Latif, and I will be your operator for today.

As a reminder, this conference is being recorded for replay purposes.

On the call today are Chris Calio, President and Chief Executive Officer; Neil Mitchill, Chief Financial Officer; and Nathan Ware, Vice President of Investor Relations. This call is being webcast live on the Internet, and there is a presentation available for download from RTX website at www.rtx.com.

referred otherwise operations, company and excluding and/or items where results speak net except as significant continuing management from acquisition often note, noted, items. will the to nonrecurring other Please significant by to accounting adjustments listeners provided The statements and cash other this and uncertainties. call are the flow company that earnings and expectations also any risks reminds in forward-looking subject to

differ provide including cause details forms and from to on actual factors filings, X-K, its SEC in XX-K, RTX's anticipated could important that results statements. the materially those XX-Q forward-looking

over Instructions] Mr. I [Operator that, will With turn the call to Calio.

Christopher Calio

Thank and morning, you, everyone. good

In As EPS we in billion sales, our and commercial press a OE, delivered in up you flow adjusted driven X% by in sales. growth XX% cash commercial our aftermarket RTX. capped growth in off saw and strong fourth XX% organic XXXX, sales, free defense XX% very growth year $XX.X quarter adjusted of organically, release, for in performance

was up margin expansion Adjusted segment We segments, X from all flow. free basis contributions and consolidated XX% business XX cash $X.XX. EPS billion of with in points year-over-year to $X.X delivered

up billion with record and demand ended year-over-year, year Customer robust, $XXX of defense a billion XX% $XX of $XXX billion, and backlog technologies remains including commercial the backlog of a we for solutions our and backlog.

is On the defense international, XX% now and X favorable backlog up year-over-year. continues shift side, Raytheon's mix points its

but a minutes, in We'll details I everyone walk is through fourth the in few know interested XXXX. quarter

a first me front. share let comments few that on So

us XXXX products defense of the environment commercial across aerospace and for and growth position demand sustained favorable advanced in strength beyond. A and our

airframer and year. passenger that air estimates grow RPKs also levels. at On the record Commercial remain approximately global IATA X% side, remains will travel robust, this backlogs commercial

We content platforms. the have on fastest-growing significant

Patriot, world. being of all the around to the F-XXX FXXX, products for need our side be such used On Coyote, critical continues there equipment tremendous NASAMS, business, as GEM-T, defense the and

strength committed international in of these continued Indo-Pacific with and in expect key increasing demand many to spending. products We also the allies partners defense in for NATO,

it's the as perform on now knows, in front, everyone RTX And positioned pretty but right to any environment. is dynamic macroeconomic

several last sources we've we capacity the and production in of And qualify substantial world our chain, around our made we've expansion services the second within that new in the in supply United and support investments and the partnerships we Over to have years, modernization continued serve. that and deliver infrastructure markets strong States.

between XXXX support these for sales to positive X% another be and X% All year-over-year. growth $XX billion, translates of and which adjusted of of $XX momentum and full between RTX expect year organic billion year factors we to

XX% businesses XX% X profit, segment to again growth. expansion, segment margin year-over-year growth we For with contributing in continued expect the to all resulting

and X% between EPS billion $X.X an $X expect perspective, of year-over-year. From we we billion adjusted for up year. EPS the to free And between cash and for $X flow, X% $X.XX, expect

towards the This $X.X deliver capital growth since we line over billion returns including already to XXXX. the merger, have $XX by as strategy of of our $XX we to end and strong end commitment continuing this of high capital capital move $XX committed return are billion sight clear Today, shareowners with billion our forward. billion deployment we returned in supports year, our to to the

for our leveraging few we've commitments, quarters: innovating to executing future performance and the growth breadth priorities and scale. on strategic our continue the been by Our in discussing will underpinned be last

of to Slide an Let's priorities. on update provide these move I'll and X, each

commitments. our on First, executing

plan, our management GTF consistent outlook comments. the remains On prior fleet our with

to Last year and improvement XX%. year, with increase production, grow forging MRO we've this driven MRO up a facilities. our in engine was we throughout As output expect significant year, discussed, output gradually to and this MRO PWXXXX XX% in continued above AOGs throughput reduce we by expect

broadly, year, across the in core drive number we organically with focused expect with to by we segment the operating continued a count to XX% Last X% performance increase to of RTX. repair. scrap, we less reducing head enhancements productivity than leverage continue company, across core, And complete record of rework growing inventory X.X delivery, year, margin and improving this on More company. operational core to and a expansion, system, emphasis Industry across an capacity and continue drive enabled to and improvements projects our reducing sales productivity on-time the improve cost

Additionally, XX we top connecting factories our analytics our of our completed goal to data platform. of proprietary

through productivity and better this visibility. harness product improvements We value drive to quality flow to enhanced efficiency, continue equipment company-wide

For in example, improvement Raytheon production delivery for card last year, XX% line. we on-time saw circuit assembly a

in equipment also will development. saw leveraging and our center we a of Pratt's use and our pilot which the year, FXXX. in double AI increase of us expand product the utilization to operations for allow in module number families plan this infrastructure, data aftermarket at XX% cells We digital to product This

the innovating scale. talk to company let's customer research rapidly technologies spent over we needs future deliver bring technology meet new billion our in for XXXX, that production Next, emerging customer-funded and our to requirements, capabilities advance ability of and In to to immediate address are uniquely Through growth. $X.X rigorous positioned at and development and we customers.

showcase conflicts. less drone recently as the of And these this Coyote and software in For you may seen, threats enhanced Designed, than example, into over the months to ability and Effector highlighted upgrade Raytheon's fielded capabilities targets. products. demonstrated rapidly effectiveness complex have enhancements our hardware Army in XX XXX against integrate with technology produced recent upgraded intercepted

advantage double the with improved cycle development engine follow a deliveries program. original with we meet urgent on continue and first endurance customers' testing more pleased good in the requirements, half to the of year including this We're field including GTF schedule our half. certification leveraging are of with the the track to Pratt make capabilities. testing of engine test programs than company, progress We're on at to with results to completion the the for need in rapid second And on classified across the the multiple same all

billion type resilient new of we R&D capabilities This on will over develop next the commercial products and directed energy, for XXXX are and advanced spend networks, field generation such again materials. $X.X platforms company fuel as to AI and in both efficiency, customer-funded innovation that of advanced continue as to defense critical plan autonomy, and

article also benefits our We're AI testing, Last and work implement year, including do across product we in responses. we we how innovating RTX. continue to first as RFP saw applications inspections areas

maintaining Collins' For business testing software quality same generative has Xx, example, using cycle AI, by improve seen while our standards. avionics times

continued use labor. and generative learning a we leverage while our cases. this speed, We machine our to expect initiatives year plan to and another have deploy improve dependency times operational external technologies, utilization, to decreasing on capital XX Through cycle

the and And breadth lastly, scale RTX. of leveraging

last to to including the of Raytheon's production capacity to maximize facility our existing Richardson, infrastructure the by for an Texas multibillion-dollar RTX space reduce part XXX,XXX been new broader investment utilization wins, facilities, RTX Through we've Survivable feet for of the Airborne award of this building year able Operations facility, program. in As Collins Center leveraging plan is expansion XX%. square support out

with this goal our together, all we've footprint, about projects very across manufacturing continue XXXX we've we feel of is all the and reducing launched company out into we creating created good significant of fixed increase number utilization, where positioned. as and lean our the the business floor to heading our capacity. to space Bringing momentum our costs and a And evaluate additional

turn to XXXX and quarter With outlook. and I'll more to our through Nathan it that, on Neil? you details over Neil take the fourth

Neil Mitchill

X. Slide Chris. on Thanks, I'm

$XX.X had offset financial we Pratt. by expectations, primarily was said, sales growth more and of XX%, the Chris up as As up fourth at strong was the to X% which OE performance and at By organically. Pratt year. were driven aftermarket, commercial ahead deliveries Collins. XX% our organically, commercial we billion was In XX% OE expected which up led quarter, by sales the lower of up higher adjusted volume finish at grew channel, narrow-body sales Commercial than XX% prior Defense,

operating billion lower Adjusted share which and earnings XX% was operating with of offset basis prior prior pension profit $X.XX up taxes by per points operating the of year. expected was from partially income. Segment expansion segment XX%, by driven of was profit XXX versus $X.X higher year, segment the margin up growth,

acquisition cash total flow Free a On expenditures. operations we've which year legal $X.XX metal included of $X.X of quarter was $X.XX previously items. of billion higher disbursements, and $X.X total, included the and the included continuing to $X.XX capital adjustments, discussed. restructuring powder In metal, powder nonrecurring the $XXX full EPS including accounting from matter full billion basis, for Raytheon contract from billion, million, matters GAAP year slightly impacts approximately and year-end compensation that approximately other of the was $X.XX and bringing $X.X of

prioritize the we quarter, to core. fourth of business in & Winch the in Also Collins we investments completed the sale our as Hoist continue

and through XXXX $X.X $XXX $XXX Lastly, we paydown million dividends, debt our in billion. we primarily for returned to paid of down million debt capital quarter, to total bringing the of shareowners,

With additional and that, on results, then share I'll take through and segment I'll over details come it outlook. Nathan hand the XXXX to you to some back our

Nathan Ware

sales programs increase XX% and Commercial organic on Collins with XX%, XX% the up expected, an Starting the a and $X.X By increase volume OE mods versus primarily up defense XXX commercial and were basis, for by were sales increase were upgrades in by were adjusted XX%, billion driven primarily and driven strength volume a commercial in in repair. Neil. to prior quarter, down up the provisioning, X% parts due aftermarket. the multiple on by Thanks, MAX. X% defense Slide an year, in in narrow-body lower channel, higher both driven And as and and X% across on platforms. aftermarket X. sales Sales quarter

up unfavorable was was commercial OE on commercial mix. Adjusted OE operating volume offset $XXX $X.X commercial defense aftermarket partially the of and versus Drop-through and higher volume profit year. million by billion prior lower

points billion year, billion resulting For adjusted sales profit, of of and adjusted $X.X in of generated basis operating margin the full XXX expansion. Collins year-over-year $XX.X

in by up deliveries all adjusted GTF sales $X.X were the and up both up Shifting increased Whitney sales and and Commercial Large primarily & XX% Slide Pratt an higher X Commercial quarter, aftermarket across Engines, Canada. primarily volume channels. with Engines. to the sales were were mix Commercial favorable Large in Commercial driven in quarter, in by organic basis, driven XX% Sales X. OE on on of XX% Pratt billion growth

by legacy FXXX offset This military driven partially the across up FXXX sales other the by X%, FXXX and In Engine engines, higher FXXX. FXXX volume lower program volume primarily Core sustainment across Upgrade platforms, were was sustainment. production, and

insurance Adjusted up year, benefited commercial recovery higher in on the in aftermarket of driven million volume mix $XXX by prior Pratt also Pratt favorable operating in and military Engines, $XXX quarter. and Large versus favorable drop-through an and the million mix Commercial OE million aftermarket profit was approximately Canada from $XX volume.

in Also billion the Pratt for quarter, $X.X awards, sustainment. of billion including $X.X FXXX booked

For adjusted operating Pratt the expansion. of margin full year, of profit, & of points in sales and basis generated resulting adjusted billion year-over-year $XX.X XXX billion Whitney $X.X

In in addition, were GTF engine XX% basis. shipments a on year-over-year up XXXX

as from volume as points the and a the offset Now higher of This and NASAMS and turning the adjusted defense driven an space lower volume growth impact programs to East with on from on defense X% $X.X up higher growth The restart billion Raytheon organically. counter-UAS of well Middle air the and systems, divestiture was contracts by systems. volume X sales quarter partially customer. including was X. in and cybersecurity air with on Sales on Slide Patriot, were associated land basis by XX% Global

improved Adjusted by $XX offset of divestiture. drop-through from million and the driven million the operating on quarter. net cybersecurity $XXX Year-over-year, million profit in up prior productivity the volume, $XXX by primarily favorable partially improved higher by impact productivity year, the versus approximately net mix, was

billion, demand with a and Romania electronic for million the to quarter billion. system. airborne Key defense resulting solutions. additional warfare awards for systems, million booked backlog classified awards and billion were book-to-bill in continued $XX million Jammer billion the the Raytheon for Missiles $X.X air a Next-Generation $XXX included $XXX of missile of Stinger highlighting Patriot Bookings of also Defense full year $X.X $XXX in $X.XX and supply Air

was year, full $X.X adjusted business resulting and generated the billion adjusted basis million XXX XXXX. approximately of billion of year-over-year profit, For margin $XXX the basis in on Net sales in points expansion. a Raytheon productivity $XX.X of year-over-year up operating at

to more provide it turn outlook. over color I'll to that, on Neil XXXX With some our back

Neil Mitchill

Thanks, Nathan.

X. Slide to Turning

through talk our outlook XXXX Let me that Chris highlighted. drivers the of

end on expect outlook, demand billion between supported total between to Collins Starting with sales, billion the and we of growth. that for by translates actuation discussed Therefore, be $XX the top line an and sales this quarter. we've second we've year. is the by to assumed the environment X% organic divestiture Within RTX completed X% $XX this basis,

XX% at we the growth. by expect it and divestitures, adjusting for aftermarket at approximately RTX level channel Looking commercial

year-over-year the on with company. see grow On which side, throughout commercial And the to as up delivery sales expected we align across are be expected we requirements, to the digits mid-single also sales defense mid-single OE ramping year. customers our are digits

expect about tailwind associated of progress With from at made expected growth completed profit you expected at last me year a respect accelerated range. year-over-year due outlook approximately take to of growth repurchases year. to of to we drive $X.XX. paying EPS, our the lower we And actuation debt the XX% midpoint the divestiture Starting $X.XX with this of in down growth. EPS the through the Operating let interest level, the roughly in headwind segment is the from divestitures walk. $X.XX segment share this Included XXXX, and is completed we've on a of

offsetting Partially well by nonservice $X.XX improve taken lower items $X.XX income, from share from the as higher our driven is pension to actions a of the these approximately we've and plans, funded as count. FAS/CAS status primarily

systems expect also is from $X.XX taxes. corporate digital higher of other primarily we of we $X.XX higher and comprised headwind invest in a expenses as which of $X.XX and finally, capabilities items, And our

$X us brings range to adjusted outlook of this per of to share. All EPS our $X.XX

cash Moving walk. our to

and The operational of will operating billion. segment first this comes year-over-year capital. from an of piece Combined, approximately our $X.X growth profit improvement drive working

billion and we as automation majority we coming our to inputs support delivery to and defense to where the inventory OE $X.X growth. material long-term $X.X our with throughput. milestones supplier expect assets Specific we we invest contract billion CapEx This also capacity year improve achieve includes and expect continue as organic from during approximately and between deliver to billion, commercial expand efforts $X.X accelerate year-over-year capital, the of improvement working product, and a

resulting Next, of the not will repeat onetime legal tailwind XXXX, contract last year that billion. in $X.X approximately matters and we paid a in

an a We in see driven and R&D cash tax-related also by headwind taxes approximately primarily XXXX. of absence in million, $XXX of benefit prior year the higher the

around midpoint. expect $X.X between up Finally, we XXXX. in billion, $X.X which impacts metal and is be $XXX compensation $X.X the billion cash billion to year-over-year in, $X be we to expect between All flow to million powder free at billion

XX, Slide Starting outlooks. that, for provide let's With I'll segment some to details turn and the with Collins.

be and to up low sales basis on organically. year digits adjusted single full expect digits We mid-single up an

anticipate I around be noted, volume. sale by As mods growth upgrades air driven double digits this of in outlook completion low for digits already assumes single the divestiture, up Adjusting and midyear. the of aftermarket to the travel we passenger and business high this commercial to actuation

saw be from growth we ramps. partially be Commercial digits multiple top of the mid-single OE sales impacts X% in to volume up are as is timing platforms to increased customers' of expected on offset by on XXXX. defense production is our single the digits up expected expected low And

operating versus and progress prior X With it driven grow across by higher the expect million to the as well across million volume pricing respect as drop-through and $XXX we all cost to efforts profit, between Collins' channels on business. on $XXX year, reduction higher continued adjusted

Finally, an with million $XX this headwind includes approximately divestiture. the associated actuation

Pratt & to Shifting Whitney.

volume to FXXX adjusted Engines double and be We partially headwinds. program. expected be aftermarket to Upgrade the single commercial up driven By year are expected channel, full up mid-single unit be with Commercial digits and is Large higher platforms year up Pratt on an we expect across commercial FXXX to sales Engine FXXX military basis. And digits organic offset to and digits Canada. sustainment both digits, and Commercial delivery mid-single OE due expect high engine mixed Core up the activity to large by across by another growth, be similar sales low

be growth. expect increased For within and Pratt's This that drop-through by OE and partially military deliveries growth adjusted versus $XXX and we will channel. profit, the year, million primarily prior mix between on offset of aftermarket $XXX million commercial driven operating commercial by

systems And offset in expected million partially sales versus Raytheon's between $XXX lower expect driven air profit $XX by growth up productivity. to land improved Also an headwind keep net adjusted favorable associated with operating is million development defense the to in is mix organically drop-through higher year, and by the mid-single the million mind, digits and there prior year. of on volume, of at and be double-digit we is sale in grow contract approximately Raytheon, $XXX business as the first quarter volume. cybersecurity last

appendix webcast. In included outlook items addition, the we've some of below-the-line an for the our of in

has the performance updates, and expected potential RTX. have ago. is of strong lot the years changed been XXXX target And have in, drivers to for value generation be several issued another since the cash there of changed. year fundamental XXXX A not company we while original All some

Okay. over I'll back it With that, turn to Chris.

Christopher Calio

I'm Neil. Thanks, on Okay. Slide XX.

how remarkable, As with I the ended technologies have continue advance years heading the market-leading The well and last over we XXXX. and pleased we we capabilities said into XXXX the we've upfront, to few I'm and make to achieved future. been growth the investments has into our right momentum

Looking can technology flow generation, and our the is synergies macroeconomic that innovate ahead, platforms. products shareowners. returns to us long-term with and significant aerospace strong focused, that at scale, confident positioned growth Combined defense aligned we enables across in margin strong are a balance drive in sheet resulting right sales, company we and to a sustainable industry growth I'm and on drivers growth well technology-driven with cash

open Okay. it up With let's that, questions. for

Operator

[Operator Instructions]

comes line Wolfe of Research. Walton Myles question first of the Our from

Myles Walton

powder wasn't of and GTF, discussion. lot a on there Chris, Maybe, the metal

plan. a cash to expectation on in still same. maybe still step-down XXXX? track it we looks that still on spend And that put I'm for the million taking is for it, billion the Are track, to $XXX your So 'XX $X to point as in news good like you're on just

Christopher Calio

Yes. Thanks, Myles.

components me the here. through go Let main

and I intact. assumptions technical all upfront, remain said the inspection consistent and remains As the underlying outlook

good output news. some was up have said look, saw this good before, the PWXXXX enabler. XX% AOGs year. progress I very So been output MRO And key last stable. We is now year. last

So in-shop good material very and progress of terms performance. flow in

But plan here in critical. the work talked to continue way to as growth going XX% a XXXX. we output that's And to about above we to and through curve ramp bend here XXXX, of we our be need

helping is year-over-year. Structural in see chain course, going important isothermal continued us And XX% were metal life up full castings improvement MRO. of into there. we've be that's output instrumental supply the to up Now forgings to And incorporate powder there. get as was we significantly. parts

As into new you going know, it's deliveries. engine already

as of again, So and again, bending as customers' is get we focus, AOG lot you back puts make takes, sure to the this imagine, that going our might as And through curve, quickly there XXX% are as possible. into the a process. we're hands our assets on

Neil Mitchill

the a ended Myles, so were a the of if $X.X and 'XX. couple side, have ahead you Perhaps. continue for further? already. amount we manage now, at we And $X.X that. in XXXX. are And We're customer timing vast the to Could I'd want parked of say able that started program. we billion agreement the to AOGs last flows. out we with that little customer estimated. our as to place where We comments, cash years, going see have those agreements We bit majority manage we under had the on the right make little cash with from think defer we billion, in placeholder where sure with the We're to this of cash over carefully $X.X between $X.X happy now we think of 'XX, about see support with Last we on a in a today's go residual work billion. I can are . Right customers back you year, billion of with out to the

far. the feel out we've good we that So about laid so profile

Operator

Peter Baird. from of question line comes next the Arment of Our

Peter Arment

are out how a on replenishing of Chris, of for priorities. -- How with in results. thinking kind new mix. you and you Nice got is aligned new see Raytheon you? stockpiles administration, the huge any spending how You've playing that so international terms

XX%, on I just replenishment side uplift you're the see side seeing you're administration? along you think opportunities kind how of the with the new coming international with that's the from

Christopher Calio

continues sort Yes. right, Thanks, our backlog. X.XX strong, the a to Good question. Raytheon, led $XX really front, billion up be you demand with book-to-bill. right? Peter. and of Well, it for products

our my you've As effectively. defending comments upfront, in allies conflicts and in operation I got in very said systems today XX-plus the very, U.S.

In you replenishment, the U.S., as it's referenced. about

As you to and standard naval on defense, the across world, it's you GEM-T, like. SM-X, about is missile AMRAM to this effectors, and move up to replenish the air SM-X, there. continuing continuing And Europe, Pac, move more munitions, family, Asia as integrated the ramp

very that seeing actually Poland, see think countries strong. So almost overall, to tailwind target, to continues to above X% for and it's of or X%. international NATO The be commit either demand again, our us. we in continue the what demand international be are spend in to be that backlog, a you're you on will Again, strong. continuing We've seen up coming

Operator

Our of America. Ron from the comes of next Bank line of Epstein question

Ronald Epstein

bumped it? going are Yesterday, on Kind . Where program? the number. contract to we about the do with of do that Air $X.X up How stand a think about what's we? for big on guys billion, engine? Where NGAP next-generation you their Force

Christopher Calio

that take one, Ron, I'll Yes, Chris. it's

is to pleased very imagine. area, that the funding requirements solution. this testing of with the there, out and risks timing, get But regardless over there. where NGAD we there. are We've you continuing our the is there's through public few to been the on any rigorous continue And of the as on really details, been can't We've resources lot key have and something we've I many of lot the seen. the have a pleased gone look, continued into in NGAP will years. that drive last So and help this too it results down we've that with us develop testing had where might been a in

a again, think with very And we're have very to going we offering. pleased competitive So award. that

Ronald Epstein

this And tailwind that think Pratt the year? of on mean, is kind Or just of how much about for how side? that do a we I financial

Neil Mitchill

Upgrade Well, I FXXX military the see on grow. I'd of this a program business. to doing, side tailwind at got we've mid-single-digit the Pratt the for we're Core between work Clearly, this their continuing and Ron. in Engine growth that here, say

broadly you lot strong. more a As aftermarket know, remains fly. speaking, continue older the of to aircraft The

So the large, I'd is put tailwind happy this Pratt, funding next say, over to of years in and a for number place by this being and see to continue this development.

Operator

question Scott comes line from Deutsche next Bank. Our the of Deuschle of

Scott Deuschle

Neil, powder are broader cash just you of tailwind remain course, any of the I'm as the capital improvement free get sense working call metal apart a components mainly reversing potentially flow in costs? XXXX. this outlook out or beyond to whether trying And XXXX from, would persistent of that there to in a normalizing XXXX

Neil Mitchill

here the company know within Sure. that flow, cash there's the entirely I and I well. lot focused appreciate question. been we're as of on a on our focus

out so And think for midpoint put at we about billion , powder of and $X.X the 'XX look about the as we metal. that outlook just at billion $X.X

the billion. operationally, there, $X.X just about you So do math

continue of capital Now got there's we we the improvement. beyond to to runway But move and contract improve see we've working into you as tailwind that assets, capital think a turns we inventory $X.X the from year-over-year baked additional level of can billion have as XXXX. working level

for Didn't well ramps year, couple XXXX very that last but support the years. been We've in already, So we're we of to stocked this there get to of I do confident. on regard. customers but lot have think a a work we're in here our focused of

got a and international we'll hundred be dollars The strong only that about a other first think nonrecurring if puts that in aside you But fairly we've of for finding of baseline. payment set operational an quarter out here making the And billion couple there's couple year. I'd that came item, large, million 'XX, and that will, court $X.X following a in tax this I range say by takes. early is always

Scott Deuschle

restarted has purchase clarify, Great. equipment issuing And XXX Chris, Boeing yet? for just orders avionics to MAX

Christopher Calio

to Yes, up. back to sure working Scott. back making at Frankly, throughout were were as Continue ramp Boeing strike you We're imagine. ready the them might the on working we with that they with when even that. ramp, closely engage we go

Operator

question Stallard from next the of Research. comes line of Vertical Rob Our

Robert Stallard

question a probably for It's Neil.

On pretty aerospace currently conservative to are what compared the it XXXX OEM Airbus guidance, looks saying. Boeing and

some or for if your guidance? So there's on that's impacting example, inventory, going anything you wondering with forecast if built contingency that into

Neil Mitchill

Sure. Yes.

of board. obviously Rob, we've Let approach, me understand the of the a contemplate of this Collins considerably, with be the not couple make the little inventory comments. year there's start a me and production here, to that think, in rates channel to let the anticipated up the bit outlook. It's with Collins a side, question going prudent I taken across at time in

up, and as you from we I to ramp continue But a go the at targeted we as ramp should see specific meet growth systems think expect it's can tell levels rate Collins, feel a we to well within narrow-body unfolds. through the year, to rising that the to value have stream. as inventory year we the positioned look the faster

look there of On were tick terms but to well. to up up on relatively on Pratt well we similar level as expect Large what we similar side seeing as look probably about comments units, color Commercial Commercial in that 'XX, Engines, deliveries were you expect additional a Engines And we at the unit Large we're units. Pratt maybe just up side, flat, couple Canada, their X% unit last as in to XX% I for of of a growth the XXXX. as year. then they in

pricing of mix pretty happy end with but that, at the see the get headwind, we the 'XX. bit little of And we're Pratt as we is a performance engines. generated continuing their Offsetting on that of into course, year. that Good

there's but to we're if Now to meet get early ahead ourselves here, capacitized, bit that to, and a growing ramp. little upside, of of kind prepared

Operator

next comes Kahyaoglu from Sheila question Our of Jefferies.

Sheila Kahyaoglu

picking XX%. Maybe GTF XX%. if were OE about Pratt. growth, look still XXXX, just up on was at aero deliveries it commercial up we the on

all do free too, think How EBIT margin in how or delta that So through million, is midpoint, think just incrementals? price bridge at the And of negative X-point does do Pratt there we spares Neil? engine about GTF? we to in drop factoring that $XXX 'XX? million aftermarket $XXX Is cash flow the on all -- about in growth on that investment GTFA and more on

Neil Mitchill

Yes.

me Pratt. -- for mix let that's and 'XX. our delivered in with last then the year move top the OE a We I'll at So walk through had engines line to good dropping of start how

so more And a to still of towards as spare see demand installs, level tilt for going look I think see I very at engines. but this modest we'll we're a year, robust

the fleet pricing demand we're on plenty there, is there's and of need of know, you that those. out good in support, As and getting

So to expect that I continue.

that or going mix 'XX majority as shift, Pratt's on growth come of the to the of the from $XXX think the aftermarket, so. profit drop-through will aftermarket. probably walk, really to We're we light In million about tune of see good

some continue range that up. see on margin is that, range $XXX headwind. of the million be going in And expected the your engine we course, offsetting You'll level to growth to as the of I'd negative business. $XXX see to of drop-through tick the million volumes kind military put in the of side of

-- aftermarket And field of just aftermarket the faster position. really good said is for I've as future side, several these robust think the know, not profitable, on it shop rate, those come to GTF agreements, And of and you given at the in for It's going us the just nature but profitable phase now, for it will fleet, long I these engines growing we've getting the to payments. continued is think you phase. a sitting cash the years. there's visits on as getting in those started out time a are and today, margin about But with the a healthy gets runway as been

And so over will Whitney as that for for few years. out Pratt next look additional RTX the & create tailwind and we

Operator

JPMorgan. question of from Seth of next Our the comes Seifman line

Seth Seifman

quick at a question maybe and Maybe the a on a tag clarification end.

and production the how deliveries at On in think think as Collins. of and to back that about you fleet years the X warranty is that's supporting aftermarket from into here, coming of aftermarket the are X or period, Collins? growth about the we When number planes do age at how question, about affect growth headed you the the growth off going ago COVID obviously

of And Pratt you the then at year. talk just this engine you large quickly, deliveries expect about if number could

Neil Mitchill

been Seth, year warranty in on bit XXXX, the of base let Collins delivers maybe the And We've with under deliveries we each new comment. start period of just they as of time thereafter period, back growing. time. products, about kind are installed me were at, lows a talking obviously, for XXXX a

that year each is than that last expect it, for off a can least rolls year that larger the you warranty years. preceded the at So several

So I expect tailwind to that provide Pratt on to some continue base. installed the to

installed got they've $XXX Think there. billion out base about it,

to going it's so forward. going even And begin aftermarket generating volumes of greater

the I there. that's aftermarket think about So how

Pratt about And is just number to follow up, exact we at see We same 'XX. shop were about VXXXX similarly XXXX. There visits the XXX situated. in look as

as years continue seen those shop XX% to we one. at their low. And And So and continued that first yet least. in demand. shop Retirements getting very expect several engines on the we're of haven't well next good XX% only because seen visits for those content addition, have robust are visit

So of we've of both the the looking of tailwind base in plenty next over those years. installed X got businesses

Seth Seifman

And then deliveries? on the Great.

Neil Mitchill

Yes.

So Large here, about yes, delivered 'XX. Commercial just in had units in Engines clarify of growth to XX% we the

. in about same We the expect growth 'XX.

Operator

Our of next from of Jason question Gursky the comes Citi Research. line

Jason Gursky

priorities suspect you year. about Chris, will a could be X some few I that your for productivity. minutes or I was wondering if talking X spend the top of

update I'm So you going get to it's to us to take to that back an you of the what where curious productivity pre-pandemic saw just maybe productivity relative were where company, we get to across are the on then. and kind

does what an mean? is Dome, Iron opportunity then do United the if we all And that up for in What of put States? dome kind you here iron really there

Christopher Calio

Yes. Thanks, Jason.

And as $XXX ramp out to commercial. front, continue I'll backlog might executing the robust, our recovery both commitments. that and of on, that there priority priority the on to demand #X and you The course, our defense with imagine, backlog, GTF a tag be plan we MRO. making sure So executing and on billion there on is continues

products. customers Our need our

that ramp, make we've to continue so continue on Collins supply to happen. side, to the and got we've chain got a And to Pratt have healthy to just

it's We have Raytheon, our seventh that. seen the so now a quarter number embedded row happy in reason. of growth, receipt At for in that people we've supply about of a chain material

on I'd the this falling again, behind. all to continue we're motors. executing we're in to a about programs, backlog. need is rocket on ramp We Jason, say, on some position. But others, healthier On

of your productivity. key course, of is of question, is a that, second on piece kind which Now

need continue count are You heard initiatives that said X% upfront, sales growth, I These kinds the to. at backlog order deliver the in of we that we've head drive to the to what XX% to margins committed growth.

AI, of increase of our And becoming that operating our our system, doing add are will you out efficient, need to the of we're core way. investments, big again, a continue all headcount, around number factories, automation, things And Jason, will part driving the productivity faster system. that processes, without across engagements. also business: Again, things out the the things see making in leaning to waste the leaning just be along out and those in more drive cheaper just to continuing

threats, to air us. But the core different your the Iron defense I It's Dome among they perhaps know, at on Israel's then evolve of systems partner in best you're Well, today. major U.S., integrated address are Iron in a that protection again, we're Dome. of need to question missile types the you third of suspect, and are layered potential Raytheon, going longer-range bedrock it. as to infrastructure. and probably to strikes, look, And

study in on We takes as significant this right something engage to over it wheelhouse. shape us, the opportunity our ready view a as period. we're for so And this

Operator

from Gautam line comes Cowen. Khanna question of next Our of the TD

Gautam Khanna

broadly where heat broadly have I like getting and and you're exchangers a was pinch Pratt, and of you've kind how points on chain, lot the are you could days. It sounds comment wondering those about supply last if the you like. the XX just But where better. past, constraints? could the seats talk is if just at the output In seeing talked progressed maybe the over still

Christopher Calio

We I of Again, as Pratt, XX% to was previously. areas pinch year-over-year castings going own A stream, and a growth of up. other at we to continue need to there's ramp. structural just to that of pieces us, it that lot but Need through that don't. to points ramp value focus are continue that of in Yes. the ramp lot We forging for the isothermal production. need to see continue

At really into so feel generally that XX about drive been lead there's it's line like microelectronics, come of seen those suppliers line, that. good back We've XX% times overdue Collins, Collins, the speaking. about items.

And those there XX so to embedded with on laser-focused people drive that.

I course, big at piece, just need others. seeing to progress of then ramp And again, motors, as some We're Raytheon, rocket on on programs, mentioned. the

chain your the suggests, that executing the be as to supply on So to critical question going mentioned. backlog I is just

so us. for area it's critical a focus And

You the mentioned large double-digit say seating heat last year. at business, sales and sort just exchangers. of on growth writ I'll Collins, so interiors

complex, what on business as good the recover. first there. customers. our are the got the then business we and feel our to requirements through continue get do have we that think to are we airframers those and certification Seating high. So about to the trajectory arms certified, to seats, to These the class relatively work and those to especially and out around specifically, there. need They've bar But there high continues certification we a

production on continue last to the in tell needs recover and And and you year on then heat our to make ramp the the customers exchangers, progress on of here we to that I remain XXXX. production output recovery. would track Doubled

feel about progress good the there. So

Operator

Fargo. next Our Akers Matt of from line comes Wells question the of

Matthew Akers

years? FAS/CAS about Can if what's we of in you should kind lower bit headwind of headwind for FAS lead 'XX. think the touch a will on and Is thought pension? little so, of looks still sort that out like And It a the CAS? that in the

Neil Mitchill

Yes. see $X.XX our in as Thanks, here, outlined a outlook. definitely Yes, we Matt. we headwind

Our plans really remain well funded.

we status with of XXX%. the fact, year In ended a funded

a And a to now, as status. number so years over funded design is to path, essentially protect us of that employed we've result, the which a de-risking plan enabling last

we see And put the come for plans that income a so result that, in has. pension really the will But bit, as and place large, expect a by and down of to remain little strong. the it really, we

see to income to and after significant but XXXX. bit year off income beyond, a continue expect We each little will it trail have

large, exited of by So the we're there's a obviously, lot and and expect to that as pension. assumptions really that in 'XX, But continue. we position into go a good

Operator

Ken Markets. of Capital Herbert next RBC Our question of comes the from line

Kenneth Herbert

for real strength you Chris of called source as a the in or fourth at the provisioning quarter. in aftermarket Collins Neil, out particular

'XX, repair for the, And of call Collins risk growth you're provide airlines there at of seeing spare you about in As -- the can think particular, incremental I any versus disaggregation the XX% as you you business? in as across they about that, of think the it, part parts any provisioning guess around is can portfolio? provide Collins destocking parts

Neil Mitchill

You're welcome, Ken.

the last Let with me part. start

level any the the last seen several growth here aftermarket about we're for XXXX. I the has really been expecting at tremendous. significant Obviously, haven't in RTX We years think And XX% destocking. growth again

bit, base is good of really repair up getting a little Collins still getting the down obviously, parts high particular, and and little in we're -- maybe installed about the talked in side that, about think it the business break good better. a we you We're just bit If I plus digits, pricing. see growing. single

with the the more new is Collins -- What's On mid-single which install going the of tends provisioning, line or aircraft. probably bit the track growth, year digits, not this a of sort bright be OE a that's in required, mods go to flat. little expected for coming spot regulatorily to the driven. Collins the kinds often depends delivery for a to was year another be area and XX% as Obviously, that But that that through off XXXX. over of that's upgrades upgrades. install, on be strong That we are will

installed are. the where and billion, of we good lot a so about also very to So Pratt, base that at really significant, going feel obviously, going aftermarket $XXX in tailwind forward. And over of back it's

Operator

Strauss of Our next line Barclays. question the of from comes David

David Strauss

for mid-teens 'XX? you're expectation Two-part guess, I GTF. Day on rough first question. getting in and today, a I gave talked Could Investor the where Neil, GTF aftermarket, color aftermarket That's precise previously you about be there. think little some 'XX, back GTF exactly question. XXXX my just to bit on at booking you aftermarket in margins first you more

going a this XXXX. incremental there. We're talked about had margin Collins, second not on percent to get And question, then close think margins XX-plus getting being obviously XX% I to in you previously business

So margins what's on think of the about right to incremental forward? level Collins going

Neil Mitchill

All question. right. Dave, for Thanks, the

Let the aftermarket. me start with

the digits. you aftermarket it And average Let growing couple a you lot last of as will you is the visits do at digits. level, mid-teens if to that accelerated I the matter. little margins relates as substantially give shop me of metal the they're they're years, we double background of over are here. the Obviously, bit a double And tell near not but quite powder

getting the aftermarket. we've good with we've because down doing to the airline EIS have So we getting and get been those And contracts as talked and we're of contracts the a here, job in good about with some really performing burn engine that is and continue the age margin well. of newer pricing, replaced customers, out really,

And addition Chris material engine And of end and improve the enhancements that, at its to in online into minute. prepared will to comment the GTFA our as new of coming this alluded in which to so year, the we're durability. Chris putting remarks, on lot a probably in a

ingredients tailwind Pratt And next going the years, get be later as fairly decade. & the the And for for the the to on there top we line, see to the that really the part of Whitney right of business. this we has be as years, several So expansion into a to profitable the continued last move Pratt VXXXX as the growth, for of pleased several GTF margins continued all been certainly to part continues of forward. is steady

So really good there.

not out you to longer but XX% of get going incrementals, ourselves ahead look about if As far going we Collins see today, I'm today, and the we I'd you're outlook put at the see as term, incremental a margin. say that the there's of work They've have business I And for think in incredible the business. margins. amount opportunity. nothing actions can't drive done of even more tremendous cost pre-COVID an to its place says that out Collins return to They to XXXX.

to were been we they're back below that years with look on to today. that are today, volumes, some assuming dealing was we've plan. the inflation, And what where if we X Obviously, I versus ago were OE

for runway business, So job look I XXXX. any there's and think ahead beyond compensate they've the in comments some as done under-absorption on... clearly a to Chris, nice we and

Christopher Calio

going GTFA today. Obviously, before only the a to the pleased was And But fully the GTF I going thing The very was delivering installed time to cuts perspective. driving on where aftermarket with are certification we're on we wing to be margins David, and advantage. on, increased amplify fleet are all be those from things testing over. on going about we're

enhancements And to so put continuing aggressively would be to wing, additional those we whether in develop are coding. cooling holes, improve and it on time whether be

a pursue ago an that's we feeling we would port go the you to like sure is, able can base we are thing gone identifying today These as GTFA we've process, that program. back have other elements through weren't into and maybe want call few something that we we the tell we're what over, avenue certification years are bring to The I'll towards. be but I'll really things

GTF that very the be So important well to drive again, will margins. as aftermarket

Operator

Our next question comes of of Noah Sachs. from Goldman line the Poponak

Noah Poponak

and more out XXXX -- back ask, those Collins, look a I old step are which had and margin achievable medium was no transitory referenced those some zoom relevant? Neil, cost longer you just at those inflation you to and is other I lot just changed, still in touched that but targets of on wanted have changed it versus I take a headwind if XXXX, from segment the which the and of and target structurally have term has or just but at

Neil Mitchill

in achievable think are all margin the we've talked targets business the about I Listen, of in term. the long

you Collins already. take one, shown margin significant by them one has If improvement

we're reduction margin aftermarket, volume I of focus the cost into points outlook. baked the think basis the of supply they XXX get there the another 'XX and will chain, have too. taking actions in the the with improvement And We

headwinds XXXX. I out COVID we been among targets we take talking to a put going environment contemplated when It's publicly. company number have there, were in in first could little these back the of while. Obviously, we a not there's that the recall

was We've really also Russia-Ukraine unique billion conflict. So it times. to over the $X.XX due sales of lost

lot a a done but been lot think to I we've there's them. overcome So of changes,

just grown that's the margin, good They're to but fourth At GTF, positive, we top the comes margins not where lighter out talked The and of today. Pratt, has be driven thought as by and too you faster, they'd line margins again, a the has we And about. far grow quarter. still saw which been coming its to think off. I with obviously, Pratt potential aftermarket

get reason XX%, as And then, north that of XX.X% of margins why course, Raytheon see that can't are no to well.

improvement good million So year-over-year. continues another the Raytheon $XXX at in productivity to XXXX We're in We there 'XX. expecting saw improve.

we So of controlling things a all changes, there's but I track. what number I what are think doing think been control. can on But and we're can we

Christopher Calio

for puts sure. say would the Yes. But put I Inflation just was of we remain each even conviction the of our runway businesses mean, we margin strong. fundamentals 'XX. when the a David, about stronger for around -- But of we some feel businesses. say I I each and headwind takes fundamentals that in huge the and out those would underlying

Noah Poponak

powdered you a headwind? year for Okay. cash flow assumption Neil, last metal the And what's your latest have GTF

Neil Mitchill

we're right in We're I now. our of cash But we we've XXXX. a linger closely I've about But bit? done I amount working job, that from right I suppose. I customers, tailwind XXXX got said it as in residual when We've flow little parked very with so So nice to 'XX. managing Could profile parked obviously, talking far. think, earlier, 'XX a them. the a of to a now, got support think go the

Operator

from Research. of of line Scott question comes final Mikus Melius Our the

Scott Mikus

new guys how the through production XXX, you have then update seats Collins. Chris, any some on was progressed could certification for your guidance Do business for the XXX, there? also the timing AXXX, rates Neil, quick the if they color question a And provide class I hoping you in implied have the on year. on

Christopher Calio

don't ahead far too of to out want I the Yes. for our question. get customers. Thanks

growth, said, from them are expecting we the digits. as we over OE But days. hear commercial mid-single coming up You'll the in

that to to deliver Our folks they said focus, base got doing they I is know we frankly, as sure want make what we doing why I supply that can sync. we've to in sure is make which there are them, with continuing the we're earlier, all hundreds to work need and everything that. that of to help

capacity But even we're to you items got again, forward. we've the say We've the ramp. make to continue at So case gone heard continue with and greater can Collins, we to them than tight that Neil some super going customers support to we to going this, think. sure stay in ramp the actually protected long-lead is

On arms requirements, some are some question, those have as complicated again, are but like the our testing, we a around those, feel forward. very working certification got speaking, I and through seating said and we've generally path earlier,

Operator

Ware. would to like conference With the now I to that, Nathan turn back

Nathan Ware

today's That concludes Latif. you, call. Thank All right.

Investor I for Relations will the you Thank for and all and be good a today, As always, team available joining us have questions. day. follow-up

Operator

concludes And conference. this today's now

You may now disconnect.

RTX (RTX) 28 Jan 252024 Q4 Earnings call transcript