
RTX (NYSE: RTX) reported second quarter 2023 results.
Second quarter 2023
- Sales of $18.3 billion, up 12 percent versus prior year including 13 percent organic growth*
- GAAP EPS from continuing operations of $0.90, up 2 percent versus prior year, which included $0.39 of acquisition accounting adjustments and net significant and/or non-recurring charges
- Adjusted EPS* of $1.29, up 11 percent versus prior year
- Operating cash flow from continuing operations of $719 million; Free cash flow* of $193 million
- Company backlog of $185 billion; including $73 billion of defense and $112 billion of commercial
- Realized $70 million of incremental RTX gross cost synergies; achieving previous $1.5 billion target
- Repurchased $596 million of RTX shares
Updates outlook for full year 2023
- Sales of $73.0 – $74.0 billion, up from $72.0 – $73.0 billion
- Adjusted EPS* of $4.95 – $5.05, up from $4.90 – $5.05
- Free cash flow* of approximately $4.3 billion, down from approximately $4.8 billion
- Confirms share repurchase of $3.0 billion of RTX shares
“Accelerating demand in global commercial aerospace and strong defense spending allowed us to deliver 12 percent sales growth and increased operating profit year-over-year, with top-line growth across all RTX business units,” said RTX Chairman and CEO Greg Hayes. “Based on the strong performance year-to-date and strong end-markets, we are raising our full year sales outlook and tightening our adjusted EPS* outlook. However, we are lowering our free cash flow* outlook to reflect the impact of an issue that has recently come to light, which will require Pratt & Whitney to remove certain engines from service for inspection earlier than expected. The continued safe operation of our fleet will always remain our number one priority.”
Second quarter 2023
RTX reported second quarter sales of $18.3 billion, up 12 percent over the prior year. GAAP EPS from continuing operations of $0.90 was up 2 percent versus the prior year and included $0.39 of acquisition accounting adjustments and net significant and/or non-recurring charges. This included $0.26 of acquisition accounting adjustments, an $0.08 charge related to an airline customer insolvency, $0.04 of restructuring and $0.01 related to segment and portfolio transformation costs. Adjusted EPS* of $1.29 was up 11 percent versus the prior year.
The company recorded net income from continuing operations attributable to common shareowners in the second quarter of $1.3 billion, up 2 percent versus the prior year, which included $568 million of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted net income* was $1.9 billion, up 10 percent versus prior year. Operating cash flow from continuing operations in the second quarter was $719 million. Capital expenditures were $526 million, resulting in free cash flow* of $193 million.
Pratt & Whitney Fleet Update
Unrelated to the company’s second quarter earnings results, Pratt & Whitney has determined that a rare condition in powder metal used to manufacture certain engine parts will require accelerated fleet inspection. This does not impact engines currently being produced.
As a result, the business anticipates that a significant portion of the PW1100G-JM engine fleet, which powers the A320neo, will require accelerated removals and inspections within the next nine to twelve months, including approximately 200 accelerated removals by mid-September of this year. The business is working to minimize operational impacts and support its customers. Management will provide additional detail on this matter during the earnings call.
Summary Financial Results – Continuing Operations Attributable to Common Shareowners
2nd Quarter |
||||||
($ in millions, except EPS) |
2023 |
2022 |
% Change |
|||
Reported |
||||||
Sales |
$ 18,315 |
$ 16,314 |
12 % |
|||
Net Income |
$ 1,327 |
$ 1,304 |
2 % |
|||
EPS |
$ 0.90 |
$ 0.88 |
2 % |
|||
Adjusted* |
||||||
Sales |
$ 18,315 |
$ 16,314 |
12 % |
|||
Net Income |
$ 1,895 |
$ 1,722 |
10 % |
|||
EPS |
$ 1.29 |
$ 1.16 |
11 % |
|||
Operating Cash Flow from Continuing Operations |
$ 719 |
$ 1,286 |
(44) % |
|||
Free Cash Flow* |
$ 193 |
$ 807 |
(76) % |
Backlog and Bookings
Backlog at the end of the second quarter was $185 billion, of which $112 billion was from commercial aerospace and $73 billion was from defense.
Notable defense bookings during the quarter included:
- $2.0 billion for F135 production at Pratt & Whitney
- $1.5 billion for F117 sustainment at Pratt & Whitney
- $1.2 billion for AMRAAM production at Raytheon Missiles & Defense (RMD)
- $1.1 billion of classified bookings at Raytheon Intelligence & Space (RIS)
- $322 million for a diverse set of cyber defense services for federal and civil customers at RIS
- $294 million of classified bookings at RMD
- $265 million for Javelin production at RMD
- $251 million for AIM-9X production at RMD
- $237 million for CLEAVAR counter UAS production at RMD
Segment Results
The company’s reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS), and Raytheon Missiles & Defense (RMD). Future quarters will reflect the business unit realignment.
Collins Aerospace
2nd Quarter |
|||||
($ in millions) |
2023 |
2022 |
% Change |
||
Reported |
|||||
Sales |
$ 5,850 |
$ 5,011 |
17 % |
||
Operating Profit |
$ 821 |
$ 546 |
50 % |
||
ROS |
14.0 % |
10.9 % |
310 |
bps |
|
Adjusted* |
|||||
Sales |
$ 5,850 |
$ 5,011 |
17 % |
||
Operating Profit |
$ 837 |
$ 617 |
36 % |
||
ROS |
14.3 % |
12.3 % |
200 |
bps |
Collins Aerospace had second quarter 2023 sales of $5,850 million, up 17 percent versus the prior year. The increase in sales was driven by a 29 percent increase in commercial aftermarket, a 14 percent increase in commercial OE, and a 5 percent increase in military. The increase in commercial sales was driven primarily by strong demand across commercial aerospace end markets, which resulted in higher flight hours and higher OE production rates. The increase in military sales was driven primarily by higher development volume.
Collins Aerospace recorded operating profit of $821 million, up 50 percent versus the prior year. The increase in operating profit was primarily driven by higher sales volume and favorable mix, partially offset by higher production costs, as well as higher R&D and SG&A expenses. On an adjusted basis, operating profit* of $837 million was up 36 percent versus the prior year. Q2 2022 included a charge of $69 million associated with the disposition of two non-core businesses.
Pratt & Whitney
2nd Quarter |
|||||
($ in millions) |
2023 |
2022 |
% Change |
||
Reported |
|||||
Sales |
$ 5,701 |
$ 4,969 |
15 % |
||
Operating Profit |
$ 230 |
$ 302 |
(24) % |
||
ROS |
4.0 % |
6.1 % |
(210) |
bps |
|
Adjusted* |
|||||
Sales |
$ 5,701 |
$ 4,969 |
15 % |
||
Operating Profit |
$ 436 |
$ 303 |
44 % |
||
ROS |
7.6 % |
6.1 % |
150 |
bps |
Pratt & Whitney had second quarter 2023 sales of $5,701 million, up 15 percent versus the prior year. The increase in sales was driven by a 26 percent increase in commercial aftermarket and a 22 percent increase in commercial OE, which was partially offset by a 3 percent decrease in military sales. The increase in commercial sales was primarily due to higher shop visit volume and content, as well as higher engine deliveries and favorable mix across both Large Commercial Engines and Pratt & Whitney Canada. The decline in military sales was driven by the absence of the benefit of an F135 production contract award in Q2 2022, which was partially offset by higher F135 sustainment volume in Q2 2023.
Pratt & Whitney recorded operating profit of $230 million, down 24 percent versus the prior year. Q2 2023 operating profit included the impact of a charge related to a customer insolvency of $181 million. Excluding the impact of the customer insolvency, and other significant and/or non-recurring items, Pratt & Whitney recorded adjusted operating profit* of $436 million in the second quarter of 2023, up 44 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket sales and favorable large commercial OE mix, which partially offset higher production costs and higher R&D expenses.
Raytheon Intelligence & Space
2nd Quarter |
|||||
($ in millions) |
2023 |
2022 |
% Change |
||
Reported |
|||||
Sales |
$ 3,655 |
$ 3,570 |
2 % |
||
Operating Profit |
$ 291 |
$ 315 |
(8) % |
||
ROS |
8.0 % |
8.8 % |
(80) |
bps |
|
Adjusted* |
|||||
Sales |
$ 3,655 |
$ 3,570 |
2 % |
||
Operating Profit |
$ 297 |
$ 315 |
(6) % |
||
ROS |
8.1 % |
8.8 % |
(70) |
bps |
RIS had second quarter 2023 sales of $3,655 million, up 2 percent versus the prior year driven by higher sales from Sensing and Effects and Cyber and Services programs, which was partially offset by lower sales from Command, Control and Communications programs.
RIS recorded operating profit of $291 million, down 8 percent versus the prior year. The decrease in operating profit was driven by unfavorable mix and higher operating expenses, which more than offset improved productivity and drop through on higher volume. On an adjusted basis, operating profit* was down 6 percent versus the prior year.
Raytheon Missiles & Defense
2nd Quarter |
|||||
($ in millions) |
2023 |
2022 |
% Change |
||
Reported |
|||||
Sales |
$ 4,000 |
$ 3,558 |
12 % |
||
Operating Profit |
$ 415 |
$ 348 |
19 % |
||
ROS |
10.4 % |
9.8 % |
60 |
bps |
|
Adjusted* |
|||||
Sales |
$ 4,000 |
$ 3,558 |
12 % |
||
Operating Profit |
$ 427 |
$ 348 |
23 % |
||
ROS |
10.7 % |
9.8 % |
90 |
bps |
RMD had second quarter 2023 sales of $4,000 million, up 12 percent versus prior year. The increase in sales was primarily driven by higher volume in Air Power, Advanced Technology and Land Warfare & Air Defense programs.
RMD recorded operating profit of $415 million, up 19 percent versus the prior year. The increase in operating profit was driven by favorable net program efficiencies and drop through on higher volume, which was partially offset by unfavorable mix resulting from early stage production programs. RMD recorded adjusted operating profit* of $427 million, up 23 percent versus the prior year.
About RTX
RTX is the world’s largest aerospace and defense company. With more than 180,000 global employees, we push the limits of technology and science to redefine how we connect and protect our world. Through industry-leading businesses – Collins Aerospace, Pratt & Whitney, and Raytheon – we are advancing aviation, engineering integrated defense systems for operational success, and developing next-generation technology solutions and manufacturing to help global customers address their most critical challenges. The company, with 2022 sales of $67 billion, is headquartered in Arlington, Virginia.