RTX Corporation Earnings - Q3 2026 Analysis & Highlights
RTX reported 12% organic sales growth, strong segment performance, record backlog, and raised its 2026 outlook; discussion also covered defense-contract ramps, commercial aftermarket demand, supply-chain capacity, and cash-flow drivers.
Key financial results
Third-quarter adjusted sales were $25 billion, up 11% year over year on an adjusted basis and 12% organically.
Adjusted segment operating profit was $3.9 billion, up 39%; segment margins expanded 310 basis points, including approximately 160 basis points from IEEPA recovery.
Adjusted EPS was $2.26, up 33% year over year; GAAP EPS from continuing operations was $1.89.
Free cash flow was $2.1 billion, including approximately $165 million of powder-metal-related compensation and $300 million of IEEPA recovery.
Backlog reached a record $340 billion, up 36% year over year and 18% sequentially.
Business segment results
Collins Aerospace: Sales were $8.4 billion, up 10% adjusted and 12% organically; adjusted operating profit was $1.8 billion, up $594 million, and margins expanded 560 basis points, including 300 basis points from IEEPA recovery.
Collins’ commercial OE sales, excluding divestitures, rose 23%; commercial aftermarket grew 9%, and defense sales increased 7%.
Pratt & Whitney: Sales were $9.2 billion, up 10% on both adjusted and organic bases; adjusted operating profit was $968 million, up $217 million, and margins were 10.5%, including 170 basis points from IEEPA recovery.
Pratt commercial aftermarket sales rose 21%, primarily on higher GTF MRO volume, while commercial OE sales declined 5% due to large-engine mix.
Raytheon: Sales were $8 billion, up 14% on both adjusted and organic bases; adjusted operating profit was $1.1 billion, up $275 million, and margins expanded 190 basis points.
Raytheon’s quarterly bookings were $52.3 billion, producing a 6.54 book-to-bill and a $130 billion backlog; its rolling 12-month book-to-bill was 2.9.
Capital allocation
RTX invested $2.8 billion in company- and customer-funded R&D and capital expenditures during the quarter to advance technology and expand capacity.
Raytheon completed a $50 million manufacturing-facility expansion in Forest, Mississippi, to support Next-Generation Jammer and radar-system production.
The company said it would make additional supply-chain and operational investments to support higher production rates under the munitions contracts.
Management described the framework contracts’ funding approach as preserving upfront free cash flow, while RTX makes capital expenditures and other investments over the next two to three years.
Industry trends and dynamics
Commercial aerospace demand remained resilient: commercial aftermarket sales grew 16% organically in Q3 despite a slight year-over-year decline in global RPKs.
OE production-rate increases on key platforms are expanding the installed base; Collins’ commercial installed base and Pratt’s narrowbody-powered fleet each grew mid-single digits year over year.
MRO demand remained strong, engine retirements were in line with expectations, and business-jet departures were up year to date.
RTX cited growing international defense demand and expected defense-budget growth in Europe, Asia-Pacific, and MENA in the following year.
Pratt reported that about 60% of its Canada fleet had not yet had a first shop visit, while management cited low-to-mid-teens margins as a longer-term ambition for Pratt.
Competitive landscape
RTX emphasized its leading franchises, growing installed base, record backlog, proven capabilities, regional partnerships, and ability to produce at scale as strengths in commercial aerospace and defense.
Raytheon’s international backlog represented 37% of total backlog, or 52% excluding the Tomahawk and AMRAAM munitions contracts; international bookings were up 2.5 times year to date year over year.
Management said the munitions contracts could support Raytheon margin expansion as production scales and efficiencies improve.
Macroeconomic environment
Management said it was monitoring airline customers’ exposure to higher fuel costs and other cost pressures, but described Q3 commercial aftermarket demand and consumer activity as resilient.
RTX said the U.S. government was operating under a continuing resolution, while management viewed its record backlog as providing visibility into fourth-quarter and following-year sales.
IEEPA recovery contributed to quarterly profit and cash flow and was included in the increased full-year outlook; management expected the remaining $50 million of cash recovery in Q4, with the benefit largely behind the company thereafter.
Management cited potential budget changes as a risk to defense-contract volumes, while saying the contracts include protections against changes in budget conditions and volumes.
Growth opportunities and strategies
RTX converted framework agreements into multiyear munitions contracts, including approximately $23 billion for Tomahawk and more than $14 billion for AMRAAM; management said the contracts provide long-term demand visibility and could support higher production and margin expansion.
Management said the munitions contracts are expected to ramp over the next two years, with full-rate production for the suite of munitions anticipated around 2030.
Pratt’s GTF fleet-management plan remained on track; PW1100 MRO output increased more than 35% year over year in Q3, and RTX expected AOG reductions in Q4.
The first GTF Advantage-powered aircraft entered service with United; RTX said the Advantage is expected to double time on wing and that Hot Section Plus is intended to bring 90%–95% of that benefit to the installed base.
Collins is pursuing structural cost reductions through operational consolidation, best-cost-location manufacturing, and reduced overhead; management said these actions were in relatively early stages and could continue to support margin improvement.
RTX is applying AI and digital tools to operations, including engine-inspection software that management said had reduced inspection time by more than 30% where deployed.
RTX is expanding manufacturing and service capacity, including Collins’ Middle East nacelle-service footprint and Pratt’s precision-parts manufacturing in Poland.
Financial Guidance and Outlook
RTX raised its 2026 adjusted-sales outlook to $97 billion–$97.5 billion, from $95 billion–$96 billion, and expects organic sales growth of 10%–11%.
The company raised its 2026 adjusted EPS outlook to $7.65–$7.75, from $7.10–$7.25; the increase at the midpoint primarily reflected approximately $0.28 of company performance and $0.25 of IEEPA recovery.
Full-year free-cash-flow guidance increased to $9 billion–$9.2 billion, from $8.5 billion–$8.75 billion.
By channel, RTX expects high-single-digit commercial OE growth, low-double-digit to low-teens commercial aftermarket growth, and low-double-digit defense sales growth.
Collins expects full-year adjusted sales growth in the high single digits and operating-profit growth of $925 million–$975 million versus 2025.
Pratt expects high-single-digit sales growth and operating-profit growth of $475 million–$525 million versus 2025.
Raytheon expects low-teens sales growth and operating-profit growth of $800 million–$850 million versus 2025.
Management expects another year of top- and bottom-line growth, improving operational margins, and strong free cash flow generation beyond 2026; it said detailed 2027 guidance would be provided on the fourth-quarter call.
The CFO said RTX expects free cash flow to increase in 2027, while noting that segment-profit growth, margin expansion, and potentially higher working capital would affect cash flow.
