RTX Corporation Earnings - Q4 2025 Analysis & Highlights
RTX Corp.'s Q4 2025 earnings call highlighted strong financial performance with significant growth in sales, adjusted EPS, and free cash flow, driven by robust demand across commercial and defense sectors. The company provided an optimistic 2026 outlook, emphasizing continued investment in capacity and technology, while addressing pension de-risking and capital allocation priorities.
Key Financial Results
Adjusted sales for the full year were $88.6 billion, up $9 billion year-over-year, or 11% organically.
Adjusted EPS was $6.29, up 10% year-over-year.
Free cash flow was $7.9 billion, up $3.4 billion year-over-year.
The company ended 2025 with a full year book-to-bill of 1.56, resulting in a record backlog of $268 billion, up 23% year-over-year.
The backlog included approximately $161 billion of commercial orders and $107 billion of defense awards.
Commercial orders were up 29% year-over-year.
Q4 2025 adjusted sales were $24.2 billion, up 12% on an adjusted basis and 14% organically.
Adjusted segment operating profit for Q4 was $2.9 billion, up 9% year-over-year.
Adjusted EPS for Q4 was $1.55, up 1% from the prior year.
Free cash flow for Q4 was $3.2 billion.
Business Segment Results
Collins sales were $7.7 billion in Q4, up 3% on an adjusted basis and 8% organically.
Collins adjusted operating profit was $1.2 billion in Q4, up $16 million versus the prior year.
For the full year, Collins generated $30.2 billion of adjusted sales and $4.9 billion of adjusted operating profit, with 9% organic sales growth and 30 basis points of year-over-year margin expansion.
Pratt & Whitney sales were $9.5 billion in Q4, up 25% on both an adjusted and organic basis.
Pratt & Whitney adjusted operating profit was $776 million in Q4, up $59 million versus the prior year.
For the full year, Pratt & Whitney generated $32.9 billion of adjusted sales and $2.7 billion of adjusted operating profit, with 17% organic sales growth and 20 basis points of year-over-year margin expansion.
Raytheon sales were $7.7 billion in Q4, up 7% on both an adjusted and organic basis.
Raytheon adjusted operating profit was $885 million in Q4, up $157 million versus the prior year.
Raytheon bookings in Q4 were $10.3 billion, resulting in a book-to-bill of 1.35 and a record backlog of $75 billion, with a full year book-to-bill of 1.43.
For the full year, Raytheon generated $28 billion of adjusted sales and $3.2 billion of adjusted operating profit, with 6% organic sales growth and 130 basis points of year-over-year margin expansion.
Capital Allocation
The company paid down $1.1 billion of debt in Q4.
In 2025, RTX invested over $10 billion in CapEx and company and customer-funded research and development.
CapEx investments in 2025 totaled $2.6 billion.
For 2026, the company plans to invest another $10.5 billion in CapEx and company and customer-funded research and development, including $3.1 billion in CapEx.
The company remains committed to its dividend.
The company anticipates making $3.4 billion of debt payments in 2026.
Industry Trends and Dynamics
Commercial air travel is expected to grow again, with global RPK projected to increase around 5% in 2026, on top of 5% in 2025.
OEM production rates are expected to increase in 2026, particularly on the A320neo, 737 Max, and 787 platforms, as well as business jet and general aviation aircraft.
There is a heightened need for munitions and integrated air and missile defense as the US and partner countries work to replenish inventories, modernize existing systems, and invest in new capabilities.
NATO allies have committed to increasing their core defense spending to approximately 3.5% of GDP by 2035.
Defense budgets in the Asia-Pacific and Middle East regions are projected to grow at an average of 3% to 4% annually over the next five years.
Competitive Landscape
RTX believes its breadth and scale provide a competitive advantage in terms of technology, cost structure, customer and market knowledge, and talent.
The company highlights its strong balance sheet and ability to innovate and invest over the long term, and to manufacture at scale for a sustained period.
RTX sees a convergence of commercial and defense tech, positioning it uniquely to compete in that environment.
Macroeconomic Environment
Higher corporate expenses and a higher effective tax rate partially offset strong segment operating profit growth in Q4 2025.
The company experienced approximately $600 million of tariff-related impacts in Q4 2025.
Higher tariffs across the business partially offset Collins' operating profit in Q4 2025.
Higher tariffs across the business partially offset Pratt & Whitney's operating profit in Q4 2025.
The company expects a $0.05 headwind from a higher share count and a $0.06 headwind from all other items, largely related to higher minority interest associated with joint ventures in 2026.
The company expects a $300 million headwind for all other items, including the net impact of pension, interest, taxes, and other investments in 2026.
The company expects a $75 million lower tariff impact in 2026 compared to 2025 for Collins.
Growth Opportunities and Strategies
The company's performance is driven by durable demand for its products and services and operational improvements enabled by its CORE operating system.
MRO output for PW1100 was up 26% for the full year 2025, with heavier shop visits increasing 40%.
The company announced the addition of two new MRO shops with the UAE Sanad Group and Spain's ITP Aero.
RTX is deploying proprietary data analytics and AI tools across its factories to monitor KPIs, identify bottlenecks, and improve output.
Pratt has reduced aged inventory by about 45% at its Lansing, Michigan facility.
Raytheon's Andover, Massachusetts facility has reduced circuit card production cycle times by about 35%.
The company received EU certification of the GTF advantage engine in Q4 2025 and expects aircraft certification soon.
Production of the advantage engine has begun, with entry into service expected later in 2026.
The company is progressing on strategic partnerships, investing $85 million across 19 companies through RTX ventures in 2025.
Raytheon will continue capacity investments in areas such as Tucson and Andover for munitions and sensors.
Collins will increase CapEx to support growing commercial and defense platforms, including the expansion of the Richardson, Texas facility.
Pratt will continue to invest in capacity across multiple sites, including Columbus, Georgia, and Asheville.
Financial Guidance and Outlook
For 2026, adjusted sales are expected to be between $92 billion and $93 billion, with 5% to 6% organic growth year-over-year.
Adjusted EPS is expected to be between $6.60 and $6.80.
Free cash flow is projected to be between $8.25 billion and $8.75 billion for 2026.
Segment operating profit is expected to drive approximately $0.59 of EPS growth at the midpoint of the 2026 outlook.
Lower average debt is expected to provide a tailwind from lower interest of about $0.06.
Approximately $0.13 from lower pension income is expected to be an offset due to de-risking pension plans.
Operational performance is expected to drive an improvement of approximately $1.1 billion in free cash flow.
Powder metal compensation is expected to be around $700 million for 2026, resulting in a tailwind of about $300 million year-over-year.
Higher CapEx of approximately $500 million will partially offset free cash flow, with total CapEx expected to be approximately $3.1 billion.
Collins' full year sales are expected to be up mid-single digits on an adjusted basis and up high single digits organically.
Collins' adjusted operating profit is expected to grow between $425 million and $525 million versus the prior year.
Pratt & Whitney's full year sales are expected to be up mid-single digits on both an adjusted and organic basis.
Pratt & Whitney's adjusted operating profit is expected to grow between $225 million and $325 million versus the prior year.
Raytheon sales are expected to grow mid-to-high single digits on both an adjusted and organic basis.
Raytheon's adjusted operating profit is expected to be up between $200 million and $300 million versus the prior year.
