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RTX Corporation (RTX) Presents at Barclays 41st Annual Industrial Select Conference 2024 (Transcript)
RTXRaytheon Technologies(RTX)2024-02-22 18:40

Summary of RTX Corporation Conference Call Company Overview - Company: RTX Corporation (NYSE: RTX) - Event: Barclays 41st Annual Industrial Select Conference 2024 - Date: February 22, 2024 - Key Participants: Chris Calio (President & COO, incoming CEO), David Strauss (Barclays) Core Industry Insights Portfolio and Growth Strategy - RTX has focused on integrating the merger between UTC and Raytheon since April 2020, emphasizing the importance of the portfolio and its alignment with current geopolitical needs [4][5] - The company has a substantial backlog of approximately 196billion∗∗asoftheendof2023,whichisakeyfocusforexecutionanddelivery[5]−Investmentprioritiesinclude∗∗196 billion** as of the end of 2023, which is a key focus for execution and delivery [5] - Investment priorities include **10 billion in R&D and CapEx in 2023, with a focus on automation and capacity increase [7][8] Aerospace Market Dynamics - The commercial aerospace market is projected to grow at 3% to 5% annually through the decade, with a backlog of 14,000 aircraft from Airbus and Boeing [10][11] - The aftermarket segment saw a 23% year-over-year growth in 2023, with expectations of 10% growth in 2024 [12] - Original Equipment (OE) is expected to grow by 10% to 15% year-over-year, driven by GTF engine deliveries [13] Supply Chain Challenges - Supply chain issues have been a significant concern, with 8% year-over-year growth in material receipts for Raytheon and 30% growth in structural castings at Pratt [16][17] - Inflation is projected to impact RTX with about 1.7billion∗∗incostsin2024,primarilyfromlaborandproductcosts[18][19]−Thecompanyisfocusingonlong−termagreementswithsupplierstostabilizethesupplychainandmitigateinflationarypressures[18][20]GTFEngineProductionandAftermarket−TheGTFengineprogramisexperiencingaramp−up,withexpectationsof∗∗201.7 billion** in costs in 2024, primarily from labor and product costs [18][19] - The company is focusing on long-term agreements with suppliers to stabilize the supply chain and mitigate inflationary pressures [18][20] GTF Engine Production and Aftermarket - The GTF engine program is experiencing a ramp-up, with expectations of **20% year-over-year growth** in deliveries [22][23] - The aftermarket for GTF engines is expected to face challenges due to powdered metal issues but is projected to achieve fee margins by **2025** [29][30] Defense Sector Insights - RTX has faced challenges with fixed-price development contracts, which have contributed to margin headwinds [34][35] - The company is learning to be more selective in contracting, focusing on core competencies and tightening supply chain processes [36][37] - Despite challenges, the defense sector has a backlog of **52 billion, indicating strong demand for products [37] Additional Key Points Core Operating System - RTX employs a CORE (Customer-Oriented Results and Excellence) operating system aimed at continuous improvement across all business phases [39][40] - The company has reduced its supplier base significantly and is focused on improving efficiency and productivity [40][41] Capital Allocation and Portfolio Management - RTX is not planning major portfolio changes but is continuously assessing its business units for potential divestitures and bolt-on technologies [44][45] - The company has committed to returning 36billionto36 billion to 37 billion to shareholders through 2025, maintaining a focus on dividend growth aligned with profit growth [45] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting RTX Corporation's focus on growth, supply chain management, and market positioning in both aerospace and defense sectors.