Date: October 22, 2024

Key Highlights:

* Strong Operational Performance: RTX reported strong operational performance in Q3 2024, driven by increased sales across all segments.

* Increased 2024 Outlook: The company raised its full-year 2024 outlook for adjusted sales and adjusted earnings per share (EPS) based on strong Q3 performance.

* Supply Chain and Geopolitical Challenges: RTX continues to face supply chain disruptions and navigate geopolitical challenges, including those related to the ongoing conflict in Ukraine and tensions with China.

* Pratt & Whitney Powder Metal Matter: The company is addressing the Powder Metal Matter impacting its PW1100G-JM engine fleet and is actively working with customers to resolve the issue.

Source: RTX Q3 2024 Earnings Press Release and Form 10-Q

Financial Performance:

* Reported Sales: $20.1 billion, up 6% year-over-year.

* Adjusted Sales: $20.1 billion, up 8% organically, excluding the divestiture of the Cybersecurity, Intelligence, and Services (CIS) business.

* Earnings Per Share (EPS):Basic EPS: $1.10

* Diluted EPS: $1.09

* Segment Net Sales: Collins Aerospace: $7.075 billion

* Pratt & Whitney: $7.239 billion

* Raytheon: $6.386 billion

* Segment Operating Profit Margins: Collins Aerospace: 15.0%

* Pratt & Whitney: 7.7%

* Raytheon: 10.1%

* Defense Bookings: $16.551 billion in Q3, up 122% year-over-year.

* Defense Backlog: $60 billion as of September 30, 2024.

Key Takeaways:

Positive:

* Strong Revenue Growth: All three segments reported robust sales increases, demonstrating strong demand for RTX products and services.

* Improved Profitability: Operating profit margins showed improvement in most segments, indicating effective cost management initiatives.

* Solid Defense Bookings: Substantial bookings in the defense sector highlight the continued strength of RTX's position in this market.

Challenges:

* Supply Chain Disruptions: Ongoing supply chain challenges, exacerbated by geopolitical events, continue to impact production timelines and increase costs.

* Geopolitical Uncertainty: The company faces uncertainty related to geopolitical events, including sanctions and potential future actions by China.

* Pratt & Whitney Powder Metal Matter: The Powder Metal Matter, requiring inspections and potential repairs of certain engines, presents a financial and operational challenge for the Pratt & Whitney segment.

Management Commentary:

* RTX delivered strong operational performance in Q3, demonstrating the resilience of its businesses and its ability to navigate complex challenges.

* The company remains focused on executing its strategic priorities, including investing in innovation, driving operational excellence, and delivering value to shareholders.

* RTX is actively working to mitigate supply chain risks and address the Pratt & Whitney Powder Metal Matter.

Forward-Looking Statements:

The company cautioned investors about several risk factors that could impact future performance, including:

* Global economic and political conditions: Including financial market volatility, inflation, interest rates, and geopolitical tensions.

* U.S. government budget and spending: Uncertainty regarding defense spending levels and potential budgetary constraints.

* Performance on contracts and programs: Potential challenges in controlling costs and meeting performance requirements on contracts.

* Supply chain disruptions: Continued disruptions to the global supply chain and potential difficulties in procuring materials and components.

* Legal proceedings and investigations: Ongoing legal matters and government investigations that could result in financial penalties and reputational damage.

Quotes:

* "RTX delivered strong operational performance in the third quarter, exceeding our expectations for sales, profit, and earnings per share," said Neil Mitchill, RTX Chief Financial Officer.

* "Our team is focused on executing our strategic priorities, including investing in innovation, driving operational excellence, and delivering value to shareholders," Mitchill added.

* "The Powder Metal Matter at Pratt & Whitney is a complex issue, and we are taking aggressive actions to address it. We are committed to working with our customers to minimize disruptions," Mitchill concluded.

Noteworthy Facts:

* The company incurred a $0.2 billion charge in Q1 2024 related to securing alternative titanium sources due to sanctions against Russia.

* RTX recognized $1.3 billion in revenue during Q3 2024 related to contract liabilities outstanding as of January 1, 2024.

* The company entered into accelerated share repurchase agreements in October 2023 to repurchase $10 billion of its common stock.

* RTX settled legal and regulatory matters related to FCPA violations and contract pricing disputes, resulting in significant financial penalties.

Conclusion:

RTX demonstrated strong operational performance in Q3 2024, exceeding analysts' expectations. However, the company continues to face headwinds related to supply chain constraints, geopolitical uncertainties, and the Pratt & Whitney Powder Metal Matter. Management remains confident in RTX's ability to navigate these challenges and deliver long-term growth and shareholder value.

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