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 guidance raises reflecting confidence in munitions production ramps and framework agreements with the Department of Defense.
Key Financial Results
Adjusted sales of $22.1 billion, up 10% organically with growth across all three business 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
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 points of tariff headwinds
Pratt & Whitney sales of $8.2 billion, up 10% organically, driven by strength in commercial aftermarket up 19% and military engines up 7%
Pratt adjusted operating profit of $711 million, up $121 million versus prior year, with 70 basis points of margin expansion despite 50 basis points of tariff headwinds
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
GTF-powered aircraft surpassed 2,700 deliveries, with Pratt powering about 45% of A320 deliveries to date, ahead of roughly 40% sold program share
PW1100 AOGs down around 15% compared to end of last year
Munitions output at Raytheon up over 40% year-over-year
Capital Allocation
$900 million invested in CapEx over the last three years to expand capacity at Tucson, Huntsville, and Andover locations for munitions production
$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%
$500 million debt paydown in the quarter
Industry Trends and Dynamics
Strong demand for commercial and defense products remains robust
Commercial backlog up 30% year-over-year with strength across both OE and aftermarket
Notable GTF wins including Vietjet Air selecting GTF engine for 44 additional aircraft and Finnair announcing intention to purchase up to 46 GTF-powered Embraer E2 aircraft
Significant defense awards across all three segments, highlighting strength of product offerings
Pratt military business awarded over $3 billion for F135 lot 19 production
Collins booked close to $3 billion of awards, including $1.7 billion for mission systems and $400 million for avionics
Raytheon booked $6.6 billion of awards, including over $600 million for Netherlands Patriot equipment and over $400 million from US Army for lower tier air and missile defense sensors
Solid RPK growth in Q1 despite Middle East disruption
Aircraft retirement rates remain below historical levels, with V2500 retirements in line with expectations
Current defense landscape underscores need for munitions depth, integrated air and missile defense technology, and advanced counter-threat capabilities
Material receipts up 13% year-over-year with 12 consecutive quarters of material growth at Raytheon
V2500 fleet is young, with 50% not having had a first or second shop visit
Competitive Landscape
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
Battle-tested systems and munitions serving as backbone of many US and allied defense architectures, including franchise programs like Patriot, GEM-T, NASAMS, AMRAAM, Tomahawk, and F135
Macroeconomic Environment
Tariff impact of approximately $75 million year-over-year tailwind as company continues to implement mitigations
IEEPA tariffs court ruling overturned and replaced with Section 122 and Section 232 tariffs, with tariff impact remaining about the same
Company paid about $500 million associated with IEEPA tariffs, with government in process of starting refund process
Unemployment at 4.3% creating challenges for attracting and retaining labor
Higher fuel prices impacting airline operations and fleet decisions
Growth Opportunities and Strategies
Five landmark framework agreements signed with Department of Defense for Critical Munitions including Tomahawk, AMRAAM, and Standard Missile family
Framework agreements provide firm demand signals for RTX and suppliers to invest and ramp production well above existing rates over next decade
Increased production will primarily occur at sites in Tucson, Arizona; Huntsville, Alabama; and Andover, Massachusetts
Collaborative funding approach incorporated in framework agreements to preserve upfront free cash flow
Raytheon successfully demonstrated non-kinetic variant of Coyote effector during US Army test event, 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
Cross-company team successfully operated propulsion system and battery pack for turboprop demonstrator at full power, expected to drive 30% improvement in fuel efficiency for regional aircraft
GTF advantage aircraft certification achieved, keeping on track for entry into service later in 2026
GTF advantage incorporates decade of learning to deliver step change in performance and time on wing
Hot Section Plus retrofit package with 30 to 35 parts providing almost 95% of durability benefits of advantage, to be introduced into MRO later in 2026
Pratt's MRO facility in Singapore developed industry-leading robotics assembling high pressure compressor rotors with 100% first pass yield and reducing assembly time by 50%
80% increase in output at Singapore facility over last two years
60% of annual manufacturing hours expected to be connected to proprietary data and analytics platform by end of 2026
Collins wheels and brakes team using real-time data to improve service life and inventory management, resulting in cost reduction across long-term pay-by-the-landing service agreements
Approximately 180,000 employees company-wide, with about one-third being engineers
Financial Guidance and Outlook
Full year adjusted sales outlook raised by $500 million to new range of $92.5 billion to $93.5 billion, up from prior range of $92 billion to $93 billion
Expected 5% to 6% organic sales growth for full year at RTX level
Commercial OE sales expected to grow mid-single-digits and commercial aftermarket sales expected to grow high single-digits for full year
Defense sales now expected to grow mid to high single-digits, up from prior expectation of mid-single-digits
Adjusted EPS outlook increased $0.10 on both low and high end of range
Adjusted EPS now expected between $6.70 and $6.90 for full year, up from prior range of $6.50 to $6.80
Free cash flow outlook maintained at between $8.25 billion and $8.75 billion for full year
Collins expected sales to grow mid-single-digits on adjusted basis and high single digits organically, with operating profit growth between $425 million and $525 million versus 2025
Pratt expected sales to grow mid-single digits on adjusted and organic basis, with operating profit growth between $225 million and $325 million versus 2025
Raytheon expected sales to grow high single digits on adjusted and organic basis, up from prior range of mid to high single digits
Raytheon operating profit growth now expected between $275 million and $375 million versus 2025, up from prior expectation of between $200 million and $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 $0.05 of drop through on higher sales at Raytheon contributing to EPS increase, with rest coming from below-the-line items including lower interest expense
Couple hundred million dollars of headwind on OE margins expected throughout course of year
Negative margins expected to continue on deliveries of new engines, but aftermarket continuing to ramp considerably with low double-digit margins
Supply Chain and Operational Execution
Supply chain output and performance critical to continued ramp up of production
Raytheon had 12 consecutive quarters of material growth
Framework agreements provide long-term firm demand giving supply chain visibility to invest in people, tooling, test equipment, and capacity
Defense industrial base will need additional suppliers to improve overall resiliency
Firm demand likely to incentivize quality suppliers from other industries to enter supply base
Department of Defense partnering with suppliers to provide strategic capital for balance sheet strength
Company covered in near and medium-term on critical minerals, still seeking to lock up longer-term partnerships and contracts
Continued focus on executing backlog, driving increased output, and innovating to bring new capabilities to market
PW1100 MRO output up 23% year-over-year on top of 35% growth in Q1 of last year
Company will continue to optimize allocation of material between OE and aftermarket to ensure health of overall fleet
Heavy shop visit turnaround time improving by about 20%
PW1100 inductions up 7% sequentially from Q4 to Q1
Structural castings up 10% year-over-year and isothermal forgings up 18% year-over-year
Workforce and Talent Retention
Company laser-focused on labor strategy given unemployment at 4.3% and need to attract and retain labor
Classified labor particularly difficult to attract due to clearance requirements
Company competitive on compensation perspective and continues to look at compensation
Uncommon dedication to mission within RTX with people excited about work and national security mission
Company has been pretty successful at retaining top folks
