RTX Corporation (RTX) Morgan Stanley's 12th Annual Laguna Conference (Transcript)

Company and Industry Overview * Company: RTX Corporation (NYSE:RTX) * Industry: Aerospace and Defense * Event: Morgan Stanley's 12th Annual Laguna Conference Call * Date: September 11, 2024 Key Points RTX Performance and Outlook * First Half Performance: RTX is pleased with its performance in the first half of the year, with strong results across all three business units. The company is still tracking to its full-year guidance. * Demand: RTX is experiencing strong demand in both the commercial aerospace and defense sectors. The company has a $206 billion backlog, which is healthy on both sides. * **Focus**: RTX's focus is on executing on this demand, delivering products at the right cost, quality, and on time. Strategic Priorities * **Executing on Commitments**: RTX is focused on improving quality, delivery, and efficiency through its core operating system and supply chain management. * **Innovating for Future Growth**: The company is investing$7.5 billion in research and development (R&D) to drive innovation and future growth. This includes initiatives in next-generation propulsion, connected factories, and technology synergies. * Leveraging Scale and Breadth: RTX is leveraging its scale and breadth to realize synergies and drive better cost and performance across its business units. Next-Generation Propulsion * Hybrid Electric Demonstrator: RTX is investing in a hybrid electric demonstrator collaboration between Collins and Pratt & Whitney, targeting the smaller aircraft segment. * GTF Advantage: The GTF Advantage program is progressing well, with a focus on durability and performance. * F-135 Engine Core Upgrade: The F-135 engine core upgrade program is on track, ensuring the F-35 remains relevant for future combat. Aerospace and Defense End Markets * Commercial Aerospace: RTX expects continued demand for new aircraft, with a projected 3% to 5% annual passenger kilometers (RPK) growth. The commercial aftermarket remains strong, driven by a large installed base of out-of-warranty aircraft. * Defense: The defense sector is experiencing strong demand, driven by global security concerns and increased spending by the US and its allies. Raytheon is well-positioned to meet this demand with its product portfolio and pipeline of future franchises. Collins Aerospace * Leadership Change: There has been a change in leadership at Collins Aerospace, but there is no change in strategy. Collins is off to a strong start in 2024, with 9% organic sales growth and margin expansion. * Cost Reduction: Collins has ongoing cost reduction initiatives, including the removal of ERP systems and the establishment of centers of excellence. Pratt & Whitney * GTF Fleet Management Plan: The GTF fleet management plan is progressing well, with a focus on improving material flow and turnaround times. * V2500: The V2500 engine continues to be a strong contributor to Pratt's earnings, with a large installed base and strong aftermarket demand. * Military Engines: Pratt's military engine business is strong, with significant positions on priority platforms such as the F-35 and B-21. Raytheon Defense * Backlog Conversion: Raytheon has a strong backlog of $51 billion, but there are challenges in converting this backlog into revenue. These challenges include material flow, capacity, and development programs. * Margin Expansion: Raytheon is focused on improving productivity and efficiency to drive margin expansion. Capital Return * Capital Allocation: RTX remains committed to its capital return strategy, which includes deleveraging, growing the dividend, and returning capital to shareholders through share repurchases. Portfolio and Integration * Portfolio: RTX's portfolio is compelling, with strong positions in Collins, Pratt, and Raytheon. The company is focused on driving synergies and improving performance across the portfolio. * Integration: The integration of Raytheon into RTX is complete, and the company is now focused on execution and driving value from the combined portfolio. Innovation and Technology * Technology Roadmap: RTX has a robust technology roadmap, focusing on areas such as sustainability, advanced propulsion, connected battlespace, and enabling technologies. * Sustainability: RTX is investing in sustainability initiatives across its business units, including Collins and Pratt. Conclusion RTX is well-positioned to continue its strong performance in the aerospace and defense sectors. The company's strategic priorities, focus on innovation, and compelling portfolio position it for future growth and success.