RTX Corporation Earnings - Q2 2026 Analysis & Highlights
RTX Corp reported strong Q2 2026 performance driven by robust demand across commercial and defense markets, with significant international expansion, record backlog, and raised full-year guidance reflecting accelerating growth in tactical missiles and aftermarket services.
Key Financial Results
Adjusted sales of $24.7 billion, up 16% organically year-over-year, driven by double-digit growth in commercial, aftermarket, and defense channels.
Adjusted earnings per share (EPS) of $1.89, up 21% year-over-year, driven by 18% growth in segment operating profit.
Free cash flow of $2.9 billion in the quarter, supported by segment profit growth, increased engine deliveries, and advanced payments from international customers.
Record backlog of $289 billion, up 22% year-over-year and 6% sequentially, reflecting exceptional demand across the portfolio.
Adjusted segment operating profit of $3.2 billion, up 18% year-over-year, with segment margins expanding 40 basis points driven by drop-through on higher volume.
Raytheon bookings of nearly $20 billion in Q2 with a book-to-bill ratio of 2.4, including over $5 billion in GEM-T Patriot effectors and $1.8 billion for AMRAAM.
Over $20 billion of commercial OE and aftermarket orders received in Q2, including AirAsia's order for 150 A220 aircraft exclusively powered by GTF engines.
Business Segment Results
Collins Aerospace
Sales of $8.2 billion, up 8% on adjusted basis and 13% organically, with strength across all channels.
Commercial OE sales up 26% driven by higher volume on narrowbody and widebody platforms.
Commercial Aftermarket sales up 10%, with 11% increase in parts and repair, 11% increase in mods and upgrades, and 7% increase in provisioning.
Defense sales up 7% versus prior year driven by higher volume across multiple programs.
Adjusted operating profit of $1.4 billion, up $121 million versus prior year, with margins expanding 30 basis points year-over-year.
Pratt & Whitney
Sales of $8.9 billion, up 16% on adjusted basis and 17% organically, driven by strength in commercial aftermarket and military.
Commercial OE sales down 8% as increased engine deliveries were more than offset by large commercial engine mix.
Commercial aftermarket sales up 25% driven by higher MRO volume, with PW1100 AOGs down 25% year-to-date and MRO output up over 40% year-over-year.
Military engine sales up 23%, driven by higher F135 volume benefiting from timing of the F135 Lot 18 contract award.
Adjusted operating profit of $740 million, up $132 million versus prior year, with margins expanding 30 basis points year-over-year.
Raytheon Intelligence & Space
Sales of $8.3 billion, up 18% on both adjusted and organic basis, driven by higher volume on land and air defense systems, naval programs, and air and space defense systems.
Adjusted operating profit of $1 billion, up $234 million versus prior year, driven by higher volume, favorable mix including Patriot programs, and improved productivity.
Margins expanded 100 basis points year-over-year, reflecting strong operational execution.
Backlog of $86 billion with 48% international, up 4 points year-over-year, and rolling 12-month book-to-bill of 1.77.
Over $10 billion of international awards booked in first half of year, up more than 2x year-over-year, including over $7 billion from European customers.
Capital Allocation
Dividend commitment with recent dividend increase announced.
Debt reduction as a priority to strengthen the balance sheet.
Investment in business capacity to meet strong demand, including $100 million additional domestic investment at Raytheon to increase GEM-T component production and accelerate LTAMDS test capabilities.
Pratt investment of over $100 million in the US to expand GTF MRO capacity across multiple sites in Texas, Florida, and Arkansas, supporting new automation repair capabilities.
Collins commercial MRO expansion in Malaysia completed in the quarter to significantly expand capacity and bring more advanced and automated MRO capabilities.
Sale of Raytheon's Blue Canyon Technologies business for $620 million as the company continues to focus on core capabilities.
Share buyback program discussed as part of capital allocation strategy, though specific amounts not detailed in prepared remarks.
Industry Trends and Dynamics
Strong commercial aerospace demand with global RPKs expected to grow in all regions outside the Middle East, and engine retirements remaining relatively low, supporting strong commercial aftermarket growth.
Airframe production rate growth expected in second half of year, driving need for OE products across narrowbody, widebody, and business jet platforms.
Passenger air travel remains resilient with commercial aftermarket continuing to be strong.
Exceptional demand for RTX products and services across both commercial and defense markets.
High demand for tactical missiles and interceptors, with Raytheon more than doubling year-over-year output across critical munitions through first half of year.
COYOTE Counter-UAS effector deployed by both US Army and Navy has been incredibly effective in field and is in high demand, with output more than doubled.
Competitive Landscape
Strong competitive position with leading franchises, growing installed base, and record backlog positioning RTX exceptionally well.
Technology leadership demonstrated through Collins selection to deliver mission autonomy software for US Air Force's Collaborative Combat Aircraft program, critical for next-generation fighter development.
GTF Advantage engine certification achieved with aircraft certification received and deliveries started to Airbus, with capability to double time on wing performance and full interchangeability with current GTF fleet.
Cross-company innovation with Raytheon utilizing modified TJ150 engine from Pratt to develop longer-range variant of StormBreaker precision-guided air-launched effector, moving from concept to upcoming flight test in less than 12 months.
International partnerships and co-production agreements strengthening competitive position, including AMRAAM co-production in Europe, Stinger co-production agreements, Patriot co-production, and partnerships with Kongsberg, NASAMS, and MBDA.
Macroeconomic Environment
Bipartisan support for significant increase in 2027 defense spending, with base budget request of $1.1 trillion representing roughly 25% increase year-over-year.
Meaningful increases in funding for RTX priority programs including Tomahawk, LTAMDS, and Standard Missile.
NATO allies driving budgets to 3.5%, supporting strong international defense demand.
Tariff headwinds still expected at Collins in 2026.
Global events reinforcing need for RTX systems, with effective intercepts on Patriot, Coyote, AMRAAM, AIM-9X, and Standard Missile family in contested environments.
Growth Opportunities and Strategies
Operational execution through core operating system and digital solutions to increase output and deliver backlog, with connected factory network now including over 30 million annual manufacturing hours on proprietary data and AI platform, up 30% since end of 2025.
GTF Fleet management plan on track with PW1100 AOGs down 25% year-to-date and expected to continue trending lower throughout second half of year.
Capacity expansion across RTX to meet long-term global demand faster, including coordinating with US and allies to expand global production capacity.
Framework agreements signed with Department of War to increase critical munitions output, with five framework agreements expected to have significant demand over next 10 years and not yet in backlog.
Supply chain resiliency investments including second and third sources in constrained areas and engagement with potential suppliers outside defense industrial base.
Multi-year visibility and commitment to suppliers critical for achieving higher production rates, with seven-year firm orders enabling suppliers to make necessary investments.
Innovation investments in next-generation technologies including autonomy software, advanced engines, and precision-guided munitions.
Financial Guidance and Outlook
Full-year adjusted sales guidance raised by $2.5 billion to new range of $95 billion to $96 billion, up from prior range of $92.5 billion to $93.5 billion.
Full-year organic sales growth of 8% to 9%, up from prior range of 5% to 6%.
Commercial OE sales expected to grow mid to high single digits, up from prior expectation of mid single digits.
Commercial Aftermarket sales expected to grow low double digits, up from prior expectation of high single digits.
Defense sales expected to grow high single digits, at higher end of prior range of mid to high single digits.
Adjusted EPS guidance increased by $0.40 on low end and $0.35 on high end to range of $7.10 to $7.25 for full year, up from prior range of $6.70 to $6.90.
Free cash flow guidance raised to $8.5 billion to $8.75 billion for full year, up from prior range of $8.25 billion to $8.75 billion.
Collins full-year sales expected to grow mid to high single digits on adjusted basis, up from prior range of mid single digit, with organically high single digit to low double digits growth.
Collins operating profit expected to grow $550 million to $625 million versus 2025, up from prior expectation of $425 million to $525 million.
Pratt & Whitney full-year sales expected to grow high single digit on both adjusted and organic basis, up from prior range of mid single digit.
Pratt operating profit expected to grow $275 million to $350 million versus 2025, up from prior expectation of $225 million to $325 million.
Raytheon full-year sales expected to grow high single digits to low double digits on adjusted and organic basis, up from prior range of high single digit.
Raytheon operating profit expected to grow $575 million to $650 million versus 2025, up from prior expectation of $275 million to $375 million.
Second half organic growth expected in 5% range at midpoint of outlook, down from 13% in first half due to difficult comparisons and material receipt normalization.
Pratt OE sales expected down in low single digit range for full year as mix shifts more towards installs and away from spares.
Operational Performance and Execution
PW1100 turnaround time reduced 23% year-over-year with much heavier work scope up 14 points, enabling strong MRO performance.
GTF engine deliveries to Airbus expected to reach record levels in 2026 with continued ramp in second half.
GTF Advantage engine entry into service expected later in 2026 with full production cutover in 2028.
V2500 shop visits on track at midpoint of full-year induction expectations with strong content continuing.
Margin expansion opportunity at Collins targeting return to 19-20% margins over next several years through volume growth, cost reduction actions, and structural tailwinds.
