Release Date: April 22, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RTX Corp (RTX, Financial) reported an 8% organic sales growth in the first quarter of 2025.
- The company achieved a 120 basis points expansion in segment margins, with strong contributions from all business segments.
- Commercial aftermarket sales increased by 21%, and defense sales grew by 4% year-over-year.
- RTX Corp (RTX) generated strong free cash flow, improving by $900 million compared to the previous year.
- The company made significant progress in its innovation pipeline, including FAA certification for the GTF Advantage and advancements in the LTAMDS program.
Negative Points
- RTX Corp (RTX) faces potential cost impacts of $850 million due to tariffs, which could affect profitability if they remain in place.
- The company has not included potential tariff impacts in its outlook for the year, indicating uncertainty in financial projections.
- There are concerns about supply chain disruptions due to tariffs, which could impact operational efficiency.
- The Raytheon segment experienced a 5% decline in adjusted sales due to the divestiture of the Cybersecurity business.
- The company is closely monitoring the dynamic global trade environment, which poses risks to its operations and financial performance.
Q & A Highlights
Q: Are you seeing the Rearm Europe effort as a big opportunity for Raytheon, and do you still expect the Raytheon business to have a book-to-bill above 1.0 this year?
A: Yes, the EU's focus on ramping up defense spending presents a significant opportunity for Raytheon. Countries like Poland, the UK, and Germany are increasing their defense budgets, and the EU has announced $850 billion in additional defense spending over the next four to five years. Raytheon is well-positioned with its integrated air and missile defense systems, and we expect a book-to-bill of 1.0 or more this year. - Christopher Calio, President & CEO
Q: Regarding the $850 million tariff impact, is that a gross or net number after mitigations? And what ability do you have to pass on costs to customers?
A: The $850 million is inclusive of mitigations. We have regulatory, contractual, and operational mitigations in place. We've been operating in an inflationary environment and have experience in passing on costs through pricing. However, the situation is fluid, and we'll adjust our strategies as needed. - Christopher Calio, President & CEO
Q: Could you discuss the potential changes in customer buying behavior and operational disruptions due to tariffs, particularly regarding China?
A: We are closely monitoring the supply chain and customer behavior. The aerospace industry has been used to a duty-free environment, and we are working with our supply base to mitigate disruptions. China is an important market, and we are developing multiple global sources to ensure supply chain stability. - Christopher Calio, President & CEO
Q: Can you provide an update on the NGAD program and its potential impact on RTX?
A: We received a $550 million award in Q1 for NGAD, and we are pleased with the progress and feedback from testing. Pratt & Whitney has a strong record in fighter propulsion technologies, and we are optimistic about the program's future benefits. - Christopher Calio, President & CEO
Q: How are you addressing the potential impact of the SPS fire on Collins or Pratt operations?
A: We are working closely with SPS and other suppliers to mitigate the impact of the fire. We are optimistic about avoiding notable disruptions by leveraging alternate suppliers and maintaining strong supply chain relationships. - Christopher Calio, President & CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
