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F500 2023 057 Raytheon Technologies_PW-WPB-A10-Test-Stand-PW1100G-JM_Engine

The aerospace and defense industry manufacturer had another year of improved sales in 2022, and in April 2023 reported $21 billion in new orders and a record backlog of $180 billion across its portfolio. 
<ul> 
 	<li>Raytheon has set out to realign its business units into three segments—Collins Aerospace, Pratt &amp; Whitney, and Raytheon—to more fully leverage its scale and realize cost savings.</li> 
 	<li>The post-COVID travel recovery strengthened sales in the quarter ended in April 2023, as Raytheon’s Collins Aerospace unit drew in $5.58 billion and its Pratt &amp; Whitney engine unit sales trailed just behind.</li> 
 	<li>In April 2023 a former Pratt &amp; Whitney manager was among a handful of aerospace industry executives who were acquitted of criminal charges in a case brought by the Justice Department that accused the group of agreeing to not hire the others’ workers. Still, workers who say they were harmed by the alleged conspiracy brought a separate civil suit against Raytheon in Connecticut federal court.</li> 
</ul>

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F500 2022-Raytheon Technologies

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G500-2021-183-RAYTHEON TECHNOLOGIES

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The newly created aerospace giant emerged in April 2020 from the merger of United Technologies and Raytheon Co. Former UT CEO Greg Hayes took over as chief executive, while Raytheon boss Thomas Kennedy became the board’s executive chairman. The pair focused the new company on winning more government orders, including a $320 million NASA contract to support operations at the International Space Station. It was a strategy created partly out of necessity, because Raytheon’s other major customer base—the commercial airline industry—was decimated by the pandemic. The company laid off 16,500 workers and cut costs by $2 billion; even so, operating profits at Raytheon’s two aerospace units dropped 67% and 131% in 2020 compared with the prior year. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">The newly created aerospace giant emerged in April 2020 from the merger of United Technologies and Raytheon Co. Former UT CEO Greg Hayes took over as chief executive, while Raytheon boss Thomas Kennedy became the board’s executive chairman. The pair focused the new company on winning more government orders, including a $320 million NASA contract to support operations at the International Space Station. It was a strategy created partly out of necessity, because Raytheon’s other major customer base—the commercial airline industry—was decimated by the pandemic. The company laid off 16,500 workers and cut costs by $2 billion; even so, operating profits at Raytheon’s two aerospace units dropped 67% and 131% in 2020 compared with the prior year.

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F500-2021-57-Raytheon Technologies

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The newly created aerospace giant emerged in April 2020 from the merger of United Technologies and Raytheon Co. Former UT CEO Greg Hayes took over as chief executive, while Raytheon boss Thomas Kennedy became the board’s executive chairman. The pair focused the new company on winning more government orders, including a $320 million NASA contract to support operations at the International Space Station. It was a strategy created partly out of necessity, because Raytheon’s other major customer base—the commercial airline industry—was decimated by the pandemic. The company laid off 16,500 workers and cut costs by $2 billion; even so, operating profits at Raytheon’s two aerospace units dropped 67% and 131% in 2020 compared with the prior year. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">The newly created aerospace giant emerged in April 2020 from the merger of United Technologies and Raytheon Co. Former UT CEO Greg Hayes took over as chief executive, while Raytheon boss Thomas Kennedy became the board’s executive chairman. The pair focused the new company on winning more government orders, including a $320 million NASA contract to support operations at the International Space Station. It was a strategy created partly out of necessity, because Raytheon’s other major customer base—the commercial airline industry—was decimated by the pandemic. The company laid off 16,500 workers and cut costs by $2 billion; even so, operating profits at Raytheon’s two aerospace units dropped 67% and 131% in 2020 compared with the prior year.

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G500-2020-119-Raytheon-Technologies

Raytheon Technologies was created in April of this year when United Technologies merged its aerospace units Pratt &amp; Whitney and Collins Aerospace with the Raytheon Company in a deal valued at $86 billion. United spun off its Carrier HVAC and Otis elevator businesses in separate transactions. Greg Hayes, who was serving as United’s CEO, continues in that role at the newly merged company, which specializes in everything from aircraft to missile defense systems.

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F500-2020-108-Raytheon

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RTX, an aerospace and defense company, provides systems and services for commercial, military, and government customers in the United States and internationally. It operates through three firms: Collins Aerospace, Pratt &amp; Whitney, and Raytheon. The Collins Aerospace Systems segment designs, produces, and supports cabin interiors, including oxygen systems, food and beverage preparation, storage and galley systems, and lavatory and wastewater management systems; battlespace, test and training range systems, crew escape systems, and simulation and training solutions. Pratt &amp; Whitney supplies aircraft engines for commercial, military, business jet, and general aviation customers; and produces, sells, and services military and commercial auxiliary power units. Raytheon provides defensive and offensive threat detection, tracking, and mitigation capabilities for U.S., foreign government, and commercial customers. The company, incorporated in 1934, was formerly known as Raytheon Technologies Corp. and changed its name to RTX Corp. in July 2023.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

RTX (RTX): Company Profile, Stock Price, News, Rankings

legacy

Good day, ladies and gentlemen, and welcome to the RTX 4th 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 Kallio, President and Chief Executive Officer Neil Mitchell, 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's website

Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding acquisition accounting adjustments and net non recurring and or significant items often referred to by management as other significant items. The company also reminds listeners that the earnings and cash flow expectations and any other forward looking statements provided in this call are subject to risks and uncertainties. RTX SEC filings, including its forms 8 ks, 10Q and 10 ks, provide details on important factors that could cause actual results to differ materially from those anticipated in the forward looking statements. Once the call becomes open for questions, With that, I will turn the call over to Mr. Kallio.

Thank you, and good morning, everyone. As you saw in our press release, our 4th quarter adjusted sales, EPS and free cash flow capped off a year of very strong performance for RTX. In 2024, we delivered $80,800,000,000 in adjusted sales, up 11% organically, driven by 14% growth in commercial OE, 13% growth in commercial aftermarket and 9% organic growth in defense sales. Adjusted EPS was up 13% year over year to $5.73 We delivered 90 basis points of consolidated segment margin expansion, the contributions from all three business segments and $4,500,000,000 in free cash flow. Customer demand for our technologies and solutions remains robust and we ended the year with a backlog of $218,000,000,000 up 11% year over year, including $125,000,000,000 of commercial backlog and a record $93,000,000,000 of defense backlog.

On the defense side, Raytheon's backlog continues its favorable mix shift and is now 44% international, up 8 points year over year. We'll walk through the Q4 details in a few minutes, but I know everyone is interested in 2025. So let me first share a few comments on that front. A favorable demand environment and the strength of our advanced products across commercial aerospace and defense position us for sustained growth in 2025 and beyond. On the commercial side, passenger air travel remains robust and IATA estimates that global RPKs will grow approximately 8% this year.

Commercial airframer backlogs also remain at record levels. We have significant content on the fastest growing platforms. On the defense side of the business, there continues to be tremendous need for our products such as Patriot, NASAMS, F135, GEM T, F-one hundred and seventeen and Coyote, all critical equipment being used around the world. We also expect continued strength in international demand for many of these products with key partners and allies in NATO, in the Indo Pacific committed to increasing defense spending. And as everyone knows, it's pretty dynamic right now on the macroeconomic front, but RTX is positioned to perform in any environment.

Over the last several years, we've continued to qualify new and second sources in our supply chain. We've made substantial investments in capacity expansion and modernization of our infrastructure in the United States. And we have strong partnerships around the world that support production and deliver services within the markets that we serve. All of these factors support another year of positive momentum for RTX. And we expect full year 2025 adjusted sales to be between $83,000,000,000 $84,000,000,000 which translates organic growth of between 4% 6% year over year.

For segment profit, we expect 10% to 13% growth resulting in continued segment margin expansion with all three businesses again contributing to the year over year growth. From an EPS perspective, we expect adjusted EPS of between $6 $6.15 up 5% to 7% year over year. And for free cash flow, we expect between $7,000,000,000 $7,500,000,000 for the year. This growth supports capital returns to our share owners with over $33,000,000,000 returned already since the merger, including $3,700,000,000 in 2024. Today, we have clear line of sight to deliver towards the high end of our $36,000,000,000 to $37,000,000,000 capital return commitment by the end of this year.

We are committed to continuing our strong capital deployment strategy as we move forward. Our performance will continue to be underpinned by the strategic priorities we've been discussing the last few quarters, executing on our commitments, innovating for future growth and leveraging our breadth and scale. Let's move to Slide 4 and I'll provide an update on each of these priorities. First, executing on our commitments. On the GTF fleet management plan, our outlook remains consistent with our prior comments.

As we've discussed, we expect to gradually reduce PW1100 AOGs throughout this year, driven by continued improvement in engine throughput and our MRO facilities. Last year, MRO output was up 30% with a significant increase in forging production. And this year, we expect MRO output to grow above 30%. More broadly, we continue to leverage our core operating system, industry 4 0 improvements and focused capacity enhancements to drive productivity across the company. Last year enabled by core, we continued to improve productivity across the company growing sales 11% organically with less than a 2% increase in headcount across RTX.

In this year, we expect to complete a record number of core projects to drive operational performance and continued segment margin expansion with an emphasis on improving on time delivery, reducing inventory and reducing the cost of scrap, rework and repair. Additionally, we completed our goal of connecting 40 of our top factories to our proprietary data analytics platform. We continue to harness this value to drive company wide productivity improvements through equipment efficiency, better quality and enhanced product flow visibility. For example, last year we saw 50% improvement on time delivery for Raytheon circuit card assembly production line. We also saw a 50% increase in equipment utilization in pilot cells at Pratt's module center for the F-one hundred and thirty five.

This year, we plan to double the number of product families leveraging this digital infrastructure, which will allow us to expand our use of data and AI in our aftermarket operations and product development. Next, let's talk innovating for future growth. In 2024, we spent over $7,500,000,000 in company and customer funded research and development to advance technologies that address the immediate and emerging needs of our customers. With our ability to rapidly bring new technology to production and meet rigorous customer requirements, we are uniquely positioned to deliver capabilities at scale. For example, Raytheon's upgraded Coyote Effector recently demonstrated enhanced capabilities against complex drone targets.

Designed, produced and fielded in less than 18 months, these enhancements showcase our ability to rapidly integrate software and hardware technology into products. And as you may have seen, the Army highlighted the effectiveness of this upgrade with over 170 threats intercepted in recent conflicts. We're leveraging the same rapid development cycle across the company, including on multiple classified programs to meet our customers' urgent need to field improved capabilities. And we continue to make good progress on the GTF advantage at Pratt with the completion of all engine testing requirements, including a test schedule with more than double the endurance testing of the original program.

are on track for engine certification in the first half of this year with deliveries to follow in the second half. This type of innovation will continue in 2025 as we plan to spend over $7,500,000,000 again on company and customer funded R and D to both field new products and develop advanced capabilities that are critical for the next generation of commercial and defense platforms, such as fuel efficiency, resilient networks, directed energy, autonomy, AI and advanced materials. We're also innovating how we do our work as we continue to implement AI applications across RTX. Last year, we saw benefits in areas including product testing, first article inspections and RFP responses. For example, using generative AI, Collins' avionics business has seen software testing cycle times improved by 3x, while maintaining our same quality standards.

We have a plan this year to deploy another 40 use cases. Through our continued initiatives to leverage machine learning and generative technologies, we expect to improve operational speed, cycle times and capital utilization, while decreasing our dependency on external labor. And lastly, leveraging the breadth and scale of RTX. As part of our broader infrastructure plan to maximize utilization of RTX facilities, Collins is building out 125,000 square feet of production space in Raytheon's Richardson, Texas facility to support new wins, including the multi $1,000,000,000 award last year for the survivable airborne operations center program. Through leveraging an existing RTX facility, we've been able to reduce the investment for this capacity expansion by 50%.

And as we continue to evaluate our footprint, we've launched a significant number of projects across the company to lean out our manufacturing floor space and increase utilization, all with the goal of reducing our fixed costs and creating additional capacity. Bringing this all together, we feel very good about the momentum we've created heading into 2025 and where our business is positioned. With that, I'll turn it over to Neil and Nathan to take you through more details on the Q4 and our 2025 outlook. Neil?

Thanks, Chris. I'm on Slide 5. As Chris said, we had strong financial performance to finish the year. In the Q4, adjusted sales of $21,600,000,000 were up 9% and up 11% organically, ahead of our prior expectations primarily driven by commercial OE at Pratt. By sales channel, growth was led by commercial aftermarket, which was up 15% and defense, which was up 10% organically.

Commercial OE sales grew 10% as higher deliveries at Pratt more than offset the lower narrow body volume we expected at Collins. Segment operating profit of $2,700,000,000 was up 29% with segment operating margin expansion of 180 basis points versus the prior year. Adjusted earnings per share of $1.54 was up 19% from the prior year driven by segment operating profit growth, which was partially offset by expected higher taxes and lower pension income. On a GAAP basis, EPS from continuing operations was $1.10 and included $0.30 of acquisition accounting adjustments, $0.05 of restructuring and $0.09 of other non recurring items. Free cash flow for the quarter was $492,000,000 bringing the full year total to $4,500,000,000 which included approximately $1,100,000,000 of powder metal compensation and slightly higher year end disbursements including capital expenditures.

In total, the full year included approximately $2,600,000,000 of impacts from powder metal, legal matters and the Raytheon contract matter that we previously discussed. Also in the Q4, we completed the sale of the Collins Hoist and Winch business as we continue to prioritize investments in our core. Lastly, we returned $852,000,000 of capital to share owners, primarily through dividends and we paid down $800,000,000 of debt in the quarter, bringing our total debt pay down for 20.24 to $2,500,000,000 With that, I'll hand it over to Nathan to take you through the segment results and then I'll come back and share some additional details on our 2025 outlook.

Thanks, Neil. Starting with Collins on Slide 6. Sales were $7,500,000,000 in the quarter, up 8% on both an adjusted and organic basis, driven by strength in defense and commercial aftermarket. By channel, defense sales were up 13%, primarily due to higher volume across multiple programs and platforms. Commercial aftermarket sales were up 12%, driven by a 21% increase in provisioning and 18% increase in mods and upgrades and a 9% increase in parts and repair.

And as expected, commercial OE sales for the quarter were down 6% versus the prior year, driven primarily by lower narrow body volume on the 737 MAX. Adjusted operating profit of $1,200,000,000 was up $172,000,000 versus the prior year. Drop through on higher commercial aftermarket and defense volume was partially offset by lower commercial OE volume and unfavorable commercial OE mix. For the full year, Collins generated $28,300,000,000 of adjusted sales and $4,500,000,000 of adjusted operating profit, resulting in 100 basis points of year over year margin expansion. Shifting to Pratt and Whitney on Slide 7.

Sales of $7,600,000,000 were up 18% on both an adjusted and organic basis, with sales growth across all three channels. Commercial OE sales were up 31% in the quarter, primarily driven by increased deliveries and favorable mix in large commercial engines. Commercial aftermarket sales were up 17% in the quarter, driven by higher volume in large commercial engines, primarily GTF and Pratt Canada. In military engines, sales were up 8% driven by higher volume across F135 production, the F135 engine core upgrade program and F135 sustainment. This was partially offset by lower sustainment volume across other legacy platforms, primarily the F100 and F117.

Adjusted operating profit of $717,000,000 was up $312,000,000 versus the prior year driven by favorable OE volume and mix in large commercial engines, favorable mix in Pratt Canada aftermarket and drop through on higher commercial aftermarket and military volume. Pratt also benefited from an approximately $70,000,000 insurance recovery in the quarter. Also in the quarter, Pratt booked $8,900,000,000 of awards, including $1,400,000,000 for F135 sustainment. For the full year, Pratt and Whitney generated $28,100,000,000 of adjusted sales and $2,300,000,000 of adjusted operating profit, resulting in 100 basis points of year over year margin expansion. In addition, GTF engine shipments in 2024 were up 14% on a year over year basis.

Now turning to Raytheon on Slide 8. Sales of $7,200,000,000 in the quarter were up 4% on an adjusted basis and 10% organically. The sales growth was driven by higher volume on land and air defense systems, including Global Patriot, NASAMS and counter UAS programs, as well as 5 points from higher volume associated with the restart of contracts with the Middle East customer. This growth was partially offset by the impact from the cybersecurity divestiture and lower volume on air and space defense systems. Adjusted operating profit of $728,000,000 was up $110,000,000 versus the prior year, driven primarily by drop through on higher volume, improved net productivity and favorable mix, partially offset by the impact from the cybersecurity divestiture.

Year over year, net productivity improved by approximately $50,000,000 in the quarter. Bookings in the quarter were $9,500,000,000 resulting in a backlog of $63,000,000,000 and a full year book to bill of $1,480,000,000 Key awards included $848,000,000 to supply Romania with additional Patriot systems, highlighting the continued demand for air and missile defense solutions. Raytheon also booked $1,900,000,000 of classified awards, dollars 763,000,000 for Stinger air defense missiles and $591,000,000 for the next generation Jammer airborne electronic warfare system. For the full year, Raytheon generated $26,800,000,000 of adjusted sales and $2,700,000,000 of adjusted operating profit, resulting in 100 basis points of year over year margin expansion. Net productivity at the business was up approximately $160,000,000 on a year over year basis 2024.

With that, I'll turn it back over to Neil to provide some more color on our 2025 outlook.

Thanks, Nathan. Turning to Slide 9, let me talk through the drivers of our 2025 outlook that Chris highlighted. Starting with sales, supported by the demand environment we've discussed, we expect total RTX sales to be between $83,000,000,000 $84,000,000,000 for the year. Within this outlook, we've assumed the Collins Actuation divestiture is completed by the end of the second quarter. Therefore, on an organic basis, this translates to between 4% 6% top line growth.

Looking at it by channel at the RTX level and adjusting for divestitures, we expect approximately 10% commercial aftermarket growth. On the commercial OE side, sales are expected to be up mid single digits year over year as we align with our customers on delivery requirements, which we see ramping throughout the year. And defense sales are also expected to grow mid single digits across the company. With respect to EPS, let me take you through the year over year walk. Starting at the segment level, at the midpoint of our outlook range, operating profit growth of 12% is expected to drive approximately $0.66 of EPS growth.

Included in this segment growth is a headwind of roughly $0.07 associated with the divestitures we completed last year and the expected actuation divestiture this year. And due to the progress we've made on paying down debt from the accelerated share repurchases completed in 2024, we expect a tailwind from lower interest of about $0.05 Partially offsetting these items is approximately $0.15 from lower FAS CAS and non service pension income driven primarily by the actions we've taken to improve the funded status of our plans as well as $0.06 from a higher share count. And finally, we also expect a $0.16 headwind from other items, which is primarily comprised of $0.06 of higher corporate expenses as we invest in our digital systems and capabilities and $0.05 of higher taxes. All of this brings us to our adjusted EPS outlook range of $6 to $6.15 per share. Moving to our cash walk, the first piece of our year over year growth comes from segment operating profit and working capital.

Combined, this will drive an operational improvement of approximately $2,300,000,000 Specific to working capital, we expect a year over year improvement of approximately $1,300,000,000 with the majority coming from inventory and contract assets as we deliver commercial OE product, achieve defense delivery milestones and improve our supplier inputs and material throughput. This also includes CapEx where we expect to invest between $2,500,000,000 $2,700,000,000 during the year as we continue to expand capacity and accelerate automation efforts to support our long term organic growth. Next, the one time legal and contract matters that we paid last year will not repeat in 2025 resulting in a tailwind of approximately $1,500,000,000 We also see a headwind of approximately $900,000,000 primarily driven by the absence of an R and D tax related benefit in the prior year and higher cash taxes in 2025. Finally, we expect powder metal compensation impacts to be between $1,100,000,000 $1,300,000,000 which is up around $100,000,000 year over year at the midpoint. All in, we expect free cash flow to be between $7,000,000,000 and $7,500,000,000 in 2025.

With that, let's turn to Slide 10 and I'll provide some details for the segment outlooks. Starting with columns, we expect full year sales to be up low single digits on an adjusted basis and up mid single digits organically. As I already noted, this outlook assumes the completion of the sale of the actuation business around mid year. Adjusting for this divestiture, we anticipate commercial aftermarket to be up high single digits to low double digits driven by growth in passenger air travel and mods and upgrades volume. Commercial OE sales are expected to be up mid single digits as increased volume on multiple platforms is partially offset by impacts from the expected timing of our customers' production ramps.

And defense is expected to be up low single digits on top of the 9% growth we saw in 2024. With respect to Collins adjusted operating profit, we expect it to grow between $500,000,000 $600,000,000 versus the prior year driven by drop through on higher volume across all three channels as well as higher pricing and continued progress on cost reduction efforts across the business. Finally, this includes an approximately $80,000,000 headwind associated with the actuation divestiture. Shifting to Pratt and Whitney, we expect full year sales to be up high single digits on both an adjusted and organic basis. By channel, we expect commercial aftermarket to be up low double digits due to higher volume across large commercial engines and frac Canada.

Commercial OE is expected to be up mid single digits with another year of similar large commercial engine unit delivery growth, partially offset by mix headwinds. And military sales are expected to be up mid single digits driven by sustainment activity across the F-one hundred and thirty five and F-one hundred platforms and the F-one hundred and thirty five engine core upgrade program. For Pratt's adjusted operating profit, we expect growth of between 325 $400,000,000 versus the prior year driven primarily by drop through on commercial aftermarket and military growth. This will be partially offset by increased commercial OE deliveries and mix within that channel. And at Raytheon, we expect sales to grow mid single digits organically as double digit growth in land and air defense systems is partially offset by lower development volume.

Raytheon's adjusted operating profit is expected to be up between $150,000,000 $225,000,000 versus the prior year, driven by drop through on higher volume, favorable contract mix and improved net productivity. Also keep in mind, there is an approximately $35,000,000 headwind associated with the sale of the cybersecurity business in the Q1 of last year. In addition, we've included an outlook for some of the below the line items in the appendix of our webcast. All in, 2025 is expected to be another strong year of performance for RTX. A lot has changed since we issued the original 2025 targets several years ago.

And while there have been some updates, the fundamental value drivers of the company and cash generation potential have not changed. Okay. With that, I'll turn it back over to

Okay. Thanks, Neil. I'm on Slide 11. As I said upfront, I'm pleased with how we ended 2024 the momentum we have heading into 2025.

The growth we've achieved over the last few years has been remarkable and we continue to make the right investments to advance our market leading technologies and capabilities well into the future. Looking ahead, we are a focused technology driven aerospace and defense company that is aligned with strong macroeconomic growth drivers and well positioned on the right industry growth platforms. Combined with technology synergies across our products and a strong balance sheet that enables us to innovate at scale, I'm confident we can drive sustainable growth in sales, margin and cash flow generation, resulting in significant long term returns to share owners. Okay. With that, let's open it up for questions.

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

Thanks. Good morning. Maybe Chris on powder metal and the GTF, there wasn't a lot of discussion. So I'm taking that as good news that you're still on track, still on plan. And maybe just to put a point to it, it looks like your cash expectation for spend in 2025 is the same.

Are we still on track for an $800,000,000 to $1,000,000,000 step down in 2026?

Yes. Thanks, Myles. Good morning. Let me go through the main components here. As I said upfront, the outlook remains consistent and the underlying technical and inspection assumptions all remain intact, so good news.

AOGs have been stable. Now look, I said this before, MRO output is the key enabler. Saw some very good progress last year. PW1100 output was up 30% last year. So very good progress in terms of material flow and in shop performance.

But we need to continue to ramp output to bend the curve here as we work our way through 2025. And we talked about a plan here of above 30% growth in 2025 and that's going to be critical. Now the supply chain is going to be instrumental in helping us get there and we've continued to see improvement there. Structural castings were up 12% year over year. Isothermal forgings output was up significantly and of course that's important as we incorporate full life powder metal parts into MRO.

As you know, it's already going into new engine deliveries. So again, there are a lot of puts and takes as you might imagine as we're going through this process. And our 100% focus again is on bending the AOG curve to make sure that we get the assets back into our customers' hands

And Myles, on the cash side, I think if you think back over the last couple of years, we started out with a placeholder of $500,000,000 We were able to defer that. Last year in 2024, we ended at about $1,100,000,000 So a little ahead of where we had estimated. And as you can see from today's comments, we see between $1,100,000,000 $1,300,000,000 for $25,000,000 We're going to continue to work with our customers to manage the timing of those cash flows. And right now, I'd say we have the residual amount parked in 2026. Could that go out a little bit further perhaps?

We want to make sure we manage the cash carefully on this program. We're happy with where we are with the customer agreements that we have in place right now with the vast majority of the AOGs are under a customer support agreement already. So we feel good about the profile that we've laid out so far.

Thank you. Our next question comes from the line of Peter Arment of Baird. Your line is open, Peter.

Yes. Good morning, Chris, Neil, Nathan. Nice results.

On the so new administration, new spending priorities, how are you thinking with how Raytheon's aligned in terms of any replenishing stockpiles and how you see kind of that playing out for you? You've got a huge international mix. I think you mentioned 44%. And just how you see kind of the uplift that's coming from the international side along with opportunities you're seeing on the replenishment side with the new administration? Thanks.

Yes. Thanks, Peter. Good question. Well, and you sort of led with it upfront, right? The demand for our products continues to be really strong, right?

Raytheon, a $63,000,000,000 backlog, 1.48 book to bill. As I said in my comments upfront, you've got 30 plus systems in operation in conflicts today defending the U. S. And our allies very, very effectively. In the U.

S, it's about replenishment as you referenced. As you move across the world, Europe, this is about integrated air and missile defense continuing to replenish effectors, GEMT, AMRAAM and the like. And as you move to Asia Pac, it's more on naval munitions, the standard family SM-three, SM-six continuing to ramp up there. So overall, again, we continue to see international demand be very strong. The NATO countries are continuing either to commit or actually spend above the 2% target.

Think of what you're seeing in Poland, it's coming up on almost 5%. Again, international demand continues to be strong. We've seen that in our backlog and that will be a tailwind for us.

Thank you. Our next question comes from the line of Ron Epstein of Bank of America. Please go ahead, Ron.

Hey, good morning, guys. Good morning. Yesterday, the Air Force bumped up the contract for NGAP to about $3,500,000,000 a big number. Where do you guys stand in the program? Where are we?

How do we think about it? Kind of what's going on with that next generation engine?

Yes, I'll take that one Ron. It's Chris. So look, regardless of where NGAD is and the timing and there's been a lot in the public out there, we've continued to develop our NGAP solution. We've gone through rigorous testing over the last few years. We've been really pleased with the results there.

I can't get into too many of the details as you might imagine, but this is something where we've had a lot of resources on it and have been very pleased with the testing that we have seen and this funding will help us continue in that area, continuing to drive down any risks on the key requirements that are there. So very pleased with that award. And again, we think we're going to have a very competitive offering.

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

Well, I'd say between the engine core upgrade on the F135 program and this work that we're doing, we've got Pratt in at mid single digit growth for the military side of their business. Clearly, a tailwind here, Ron. I see this continuing to grow. As you know, more broadly speaking, a lot of the older aircraft continue to fly. The aftermarket remains strong.

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

Thank you. Our next question comes from the line of Scott Deutschland of Deutsche Bank. Your line is open, Scott.

Neil, are there any components of the free cash flow outlook in 2025 that you would call out as potentially normalizing or reversing in 2026 apart from, of course, the powder metal costs? And I'm mainly just trying to get a sense of whether this broader working capital improvement can remain a persistent tailwind beyond 2025? Thank you.

Sure. Appreciate the question. I know there's been a lot of focus on our cash flow we're focused on that entirely here within the company as well. And so as we look at the outlook that we just put out for 2025, think about $7,200,000,000 at the midpoint and about $1,200,000,000 of powder metal. So you just do the math there operationally about $8,400,000,000 Now there's a $1,300,000,000 working capital tailwind baked into that year over year improvement.

But as you can see from the level of inventory we have and the level of contract assets, we think we've got additional runway to continue to improve working capital turns as we move beyond 2025. So we have a lot of work to do here in 2025 already, but we're very confident. We've been focused on this for a couple of years. Didn't get there last year, but I think we're well stocked to support the ramps of our customers in that regard. The only other non recurring item, if you will, that I think about in 2025, we've got a couple of $100,000,000 set aside for an international tax payment that we'll be making here in the Q1 following a court finding that came out early this year.

And there's always a couple of puts and takes. But by and large, I'd say that $8,000,000,000 $8,500,000,000 range is fairly strong operational baseline.

to clarify, has Boeing restarted issuing purchase orders for 737 MAX avionics equipment yet?

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

Thank you. Our next question comes from the line of Rob Stallard of Vertical Research. Your question please, Rob.

It's probably a question for Neil. On the 2025, aerospace OEM guidance, it looks pretty conservative compared to what Airbus and Boeing are currently saying. Wondering if you built some contingency into your forecast or if there's anything going on with inventory, for example, that's impacting that guidance? Thank you.

Sure. Yes, let me make a couple of comments, Rob. Let me start with the Collins side. I understand the question with production rates anticipated to be going up considerably. There's obviously a little bit of inventory in the channel here.

We've taken a prudent approach, I think, at this time of the year to contemplate that in the Collins outlook. It's not across the board. I think it's targeted to specific systems within the narrow body value stream. But as we look for the year, we expect the ramp to continue to go up. And as you can tell from the inventory levels that we have at Collins, feel well positioned to meet a rising rate ramp should we see a faster growth as the year unfolds.

On the Pratt side, maybe just a couple of comments for additional color there as well. Large commercial engines, we were up 14% in unit deliveries last year. I expect a similar level of unit growth as we look to 2025. And then as you look at Pratt Canada, they were relatively flat, up about 1% on their units, but we expect that to tick up as well in 2025, probably similar to what we're seeing on the large commercial engine side in terms of units. Offsetting that, of course, there's a little bit of mix headwind, but we're pretty happy with the performance that Pratt generated at the end of the year, good pricing on their engines.

And we see that continuing as we get into 2025. Now a little bit early to kind of get ahead of ourselves here, but if there's upside, we're prepared to and capacitize to meet that growing ramp.

Our next question is from Jefferies. Your question please, Sheila.

Maybe just still picking up on commercial aero on Pratt, 2024. If we look at the OE growth, it was about 21%. GTF deliveries were up 14%. So is that 7 point delta all price and spares on GTF? How do we think about that in 2025?

And on EBIT growth of 350 at the midpoint of 370, Does that all drop through to the free cash flow bridge too, Neil? Is there how do we think about negative engine margin factoring in more investment in GTFA and just aftermarket incrementals?

Yes. So let me start with the OE top line and then I'll move to the how that's dropping through in our walk for 2025. We had a good mix of engines delivered last year at Pratt. And so as I look at this year, I think we'll see a modest tilt towards more installs, but we're still going to see a very robust level of demand for spare engines. As you know, the fleet is in need of that support and there's plenty of demand out there and we're getting good pricing on those.

So expect that to continue. In light of that mix shift, as we think about the 20 25 walk, the majority of Pratt's profit growth will come from aftermarket. We're going to see really good drop through on the aftermarket, probably to the tune of $500,000,000 or so. You'll see your expected level of drop through on the military side of the growth in the business. And offsetting that of course is going to be some negative engine margin headwind.

I'd put that in the range of 150 to 200 kind of range, as we see the volumes continue to tick up. But as I've said for a long time now, getting these engines out in the field is healthy for the fleet and it just gets us started faster on getting to the aftermarket phase. And as you think about the aftermarket phase of the GTF today, sitting in a really good position. It's growing at a robust rate. It is profitable and we've been profitable for several years.

And I think there's continued runway, not just on the margin side, but as you know, given the nature of these agreements, those will those future shop visits are going to come with cash payments. And so that will create additional tailwind for Pratt and Whitney and for RTX as we look out over the next few years.

RTX (RTX) Q4 2024 Earnings Call Transcript

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