RTX Corporation Earnings - Q1 2026 Analysis & Highlights
RTX Corporation reported strong Q1 2026 results driven by robust defense demand and commercial aerospace growth, with significant momentum in munitions production, framework agreements for critical defense systems, and operational improvements across all three business segments.
Key Financial Results
Adjusted sales of $22.1 billion, up 10% organically with growth across all three channels
Adjusted EPS of $1.78, up 21% year-over-year, driven by 14% growth in segment operating profit
Free cash flow of $1.3 billion, up $500 million from Q1 last year
Book-to-bill ratio of 1.14 with record backlog of $271 billion, up 25% year-over-year
Adjusted segment operating profit of $2.9 billion, up 14% year-over-year
Consolidated segment margin expansion of 70 basis points with contributions from all three segments
GAAP earnings per share from continuing operations of $1.51, including $0.27 of acquisition accounting adjustments
Debt paydown of $500 million in the quarter
Business Segment Results
Collins segment sales of $7.6 billion, up 10% organically, with commercial OE up 15%, commercial aftermarket up 7%, and defense up 9%
Collins adjusted operating profit of $1.3 billion, up $71 million versus prior year, with 10 basis points of margin expansion despite 130 basis point tariff headwind
Pratt & Whitney sales of $8.2 billion, up 10% organically, driven by commercial aftermarket up 19% and military engines up 7%, while commercial OE was down 1%
Pratt adjusted operating profit of $711 million, up $121 million versus prior year, with 70 basis points of margin expansion despite 50 basis point tariff headwind
Raytheon sales of $6.9 billion, up 9% organically, driven by higher volume on land and air defense systems including Patriot and GEM-T, and naval munitions programs
Raytheon adjusted operating profit of $845 million, up $167 million versus prior year, with 150 basis points of margin expansion driven by favorable mix and increased productivity
Raytheon bookings of $6.6 billion with book-to-bill of 0.96 and backlog of $74 billion
Raytheon rolling 12-month book-to-bill of 1.48
Capital Allocation
$900 million invested in CapEx over the last three years at Tucson, Huntsville, and Andover locations to expand munitions production capacity
$200 million investment announced to expand capabilities at Columbus, Georgia facility supporting GTF and F135 programs
$115 million expansion completed at Redstone Missile Integration Facility in Huntsville, increasing munitions capacity by over 50%
Significant additional investments planned to advance production capabilities and add new manufacturing lines to support framework agreements
$500 million debt paydown in Q1 2026
Industry Trends and Dynamics
Munitions output at Raytheon up over 40% year-over-year in Q1
Material receipts at Raytheon up 13% year-over-year in Q1 with 12 consecutive quarters of material growth
GTF-powered aircraft surpassed 2,700 deliveries with Pratt powering about 45% of A320 deliveries to-date, ahead of roughly 40% sold program share
GTF program achieved 10 years in service with over 50 million flight hours and backlog of about 8,000 engines
PW1100 AOGs down around 15% compared to end of last year
PW1100 MRO output up 23% year-over-year in Q1 on top of 35% growth in Q1 2025
Commercial OE in first quarter in line with expectations with continued production ramps expected across multiple platforms
Solid RPK growth despite Middle East disruption with aircraft retirement rates below historical levels
Raytheon signed five landmark framework agreements with Department for Critical Munitions including Tomahawk, AMRAAM, and Standard Missile family
Competitive Landscape
Pratt powering about 45% of A320 deliveries to-date, ahead of roughly 40% sold program share
GTF advantage aircraft certification received, incorporating a decade of learning to deliver step change in performance and time on wing
Coyote non-kinetic variant successfully demonstrated, providing lower cost counter UAS capability that can be recalled and redeployed
Collins completed successful flight test of mission autonomy software for US Air Force's collaborative combat aircraft program
Hybrid electric propulsion system successfully operated at full power for turboprop demonstrator, expected to drive 30% improvement in fuel efficiency
Macroeconomic Environment
Tariff impact of approximately $75 million year-over-year tailwind expected for full year with continued mitigation implementation
IEEPA tariffs overturned and replaced with Section 122 and Section 232 tariffs, with tariff impact on balance about the same
Approximately $500 million paid associated with IEEPA tariffs with government refund process underway
No change to full year tariff outlook recorded in guidance
Unemployment at 4.3% creating challenges for attracting and retaining labor, particularly classified labor requiring security clearances
Global events being closely monitored with dynamic environment but underlying demand for OE products and aftermarket services remaining durable
Higher fuel prices impacting airline decisions on capacity adjustments and aircraft retirements
Growth Opportunities and Strategies
Framework agreements providing long-term firm demand signals to enable supply chain investment in people, tooling, test equipment and capacity
Collaborative funding approach in framework agreements to preserve upfront free cash flow
Increased production at Tucson, Huntsville, and Andover to support framework agreements over next decade
Defense industrial base needing additional suppliers to improve overall resiliency, with firm demand incentivizing quality suppliers from other industries
Department of War partnering with suppliers to provide strategic capital for balance sheet strength and investments
GTF advantage retrofit package (Hot Section Plus) with 30 to 35 parts providing almost 95% of durability benefits, to be introduced into MRO later this year
Pratt's MRO facility in Singapore developed industry-leading robotics achieving 100% first pass yield and reducing assembly time by 50%
80% increase in output at Singapore facility over last two years with capabilities being deployed across MRO sites
60% of annual manufacturing hours expected to be connected to proprietary data and analytics platform by end of year
Real-time data utilization by Collins wheels and brakes team to improve service life understanding and inventory management
Capacity expansion at Collins to support recently awarded FAA contract for radar systems and air traffic modernization opportunities
Raytheon completing $115 million expansion of Redstone Missile Integration Facility increasing capacity by over 50%
Pratt announcing $200 million investment to expand Columbus, Georgia facility supporting GTF and F135 programs
Coyote system in strong demand both domestically and internationally with FMS case approved for UAE
Platform-agnostic supplier opportunities for mission systems, autonomy, and propulsion on lower-cost platforms
Financial Guidance and Outlook
Full year adjusted sales outlook raised by $500 million to range of $92.5 billion to $93.5 billion, up from prior range of $92 billion to $93 billion
5% to 6% organic sales growth expected for full year at RTX level
Commercial OE sales expected to grow mid-single-digits for full year
Commercial aftermarket sales expected to grow high single-digits for full year
Defense sales expected to grow mid to high single-digits for full year, up from prior expectation of mid-single-digits
Adjusted EPS outlook increased $0.10 on both low and high end of range
Adjusted EPS guidance of $6.70 to $6.90 for full year, up from prior range of $6.50 to $6.80
Approximately $0.05 of drop through on higher Raytheon sales with rest from lower interest expense
Free cash flow outlook of $8.25 billion to $8.75 billion for full year maintained
Collins sales expected to grow mid-single-digits on adjusted basis and high single digits organically
Collins operating profit growth of $425 million to $525 million versus 2025
Pratt sales expected to grow mid-single-digits on adjusted and organic basis
Pratt operating profit growth of $225 million to $325 million versus 2025
Raytheon sales expected to grow high single-digits on adjusted and organic basis
Raytheon operating profit growth of $275 million to $375 million versus 2025, up from prior expectation of $200 million to $300 million
Mid to high single-digit large commercial engine delivery growth expected for full year
No changes to commercial outlook for the year based on current environment
Approximately $170 million of powder metal-related compensation included in Q1 free cash flow
Operational Performance and Execution
GTF financial and technical outlook remains on track
GTF shipments in line with expectations for Q1
Heavy shop visit turnaround time improving by about 20% enabling AOG reduction
PW1100 inductions up 7% sequentially from Q4 to Q1
Structural castings up 10% year-over-year and isothermal forgings up 18% year-over-year
Pratt Canada diverse business with 70,000 units in service
V2500 fleet young with 50% not having had first or second shop visit
V2500 shop visits expected at run rate of about 800 for full year
1% to 2% retirement rates expected for V2500 fleet
Interiors business sales up low teens in first quarter
Interiors business expecting solid growth for full year
