Raytheon Technologies(RTX) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year 2025, adjusted sales were $88.6 billion, an increase of $9 billion year-over-year, or 11% organically [3] - Adjusted EPS was $6.29, up 10% year-over-year, and free cash flow was $7.9 billion, an increase of $3.4 billion year-over-year [3] - The company ended 2025 with a book-to-bill ratio of 1.56 and a record backlog of $268 billion, up 23% year-over-year [3] Business Line Data and Key Metrics Changes - Commercial OE sales grew by 10%, commercial aftermarket by 18%, and defense by 8% for the full year [3] - In the fourth quarter, Collins' sales were $7.7 billion, up 3% adjusted and 8% organically, driven by commercial OE and aftermarket [17] - Pratt & Whitney's sales were $9.5 billion, up 25% on both an adjusted and organic basis, with commercial OE sales up 28% [19] - Raytheon's sales were $7.7 billion, up 7% on both an adjusted and organic basis, driven by higher volume on land and air defense systems [20] Market Data and Key Metrics Changes - Global RPKs are projected to increase around 5% in 2026, following a similar growth in 2025 [5] - The defense budgets in the Asia-Pacific and Middle East regions are expected to grow at an average of 3%-4% annually over the next five years [8] Company Strategy and Development Direction - The company aims to invest significantly in capacity and technology, with over $10 billion in CapEx planned for 2026 [11] - The strategic focus includes increasing production rates for key aircraft platforms and enhancing operational efficiencies through digital solutions [10] - The company is positioned to leverage its commercial expertise to support defense transformation initiatives [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand and operational execution, expecting adjusted sales for 2026 to be between $92 billion and $93 billion, with 5%-6% organic growth [9] - Adjusted EPS for 2026 is projected to be between $6.60 and $6.80, with free cash flow expected to be between $8.25 billion and $8.75 billion [9] - The company anticipates continued margin expansion driven by productivity improvements and cost management [9] Other Important Information - The company invested $2.6 billion in CapEx in 2025, focusing on capacity expansion and technology upgrades [12] - The GTF Fleet Management Plan is on track, with MRO output up 39% in the fourth quarter [31] Q&A Session Summary Question: Update on GTF Fleet Management Plan - Management confirmed that the financial and technical outlook remains on track, with AOG down over 20% from highs in 2025 and MRO output significantly improving [30][31] Question: Thoughts on Defense Capital Deployment - Management acknowledged the importance of their products for national security and emphasized their commitment to ramping production and investing in capacity [32][33] Question: Portfolio Composition and Monetization Opportunities - Management expressed confidence in RTX's ability to meet current and future demands, highlighting the competitive advantages of their scale and technology [36][37] Question: 2026 Guidance for Pratt & Whitney - Management provided insights into expected growth rates for large commercial engine deliveries and emphasized the balance between MRO and new installations [39][40] Question: Raytheon Segment Growth Rates - Management indicated that the majority of sales growth in Raytheon is driven by land and air defense systems, with a strong backlog supporting future growth [46][47]