01—Abstract
Summary
Summary of the 8-K filed April 23, 2024. Cited figures are marked; the original filing is the authoritative source.
RTX Corporation's Q1 2024 results, furnished under Item 2.02 of this 8-K, show a quarter led by top-line strength and a record backlog.
Sales rose 12% year over year to $19.3 billiona, with 12% organic growth, and the company booked over $25 billion of new orders, producing a book-to-bill of 1.34. Total backlog reached a record $202 billion, comprising $125 billion of commercial aerospace and $77 billion of defense. Management reaffirmed full-year 2024 guidance of $78.0-$79.0 billion in sales, adjusted EPS of $5.25-$5.40, and free cash flow of approximately $5.7 billion.
Reported GAAP EPS of $1.28b (up 32%) flattered the period, as it included $0.29 of acquisition accounting adjustments offset by a $0.23 net benefit from significant non-recurring items, including tax audit settlements and a gain on the Cybersecurity, Intelligence and Services divestiture, partly offset by a $175 million charge tied to alternative titanium sourcing after Canadian sanctions. Adjusted EPS of $1.34 rose 10%, but adjusted net income was flat at $1.8 billion because higher interest expense and lower pension income offset segment profit growth. Cash generation was weak in the quarter: operating cash flow was $342 million and free cash flow was negative $125 million, though this was a substantial improvement from negative $1.4 billion a year earlier.
Investors will likely focus on whether the back-half cash ramp needed to reach the $5.7 billionc full-year target materializes, and on the GTF powder metal fleet remediation. Segment results were mixed. Collins Aerospace grew sales 9% but saw reported operating profit fall 5% due to the titanium charge; adjusted operating profit rose 16%.
Pratt & Whitney sales grew 23%, driven by GTF OE volume, while adjusted operating profit was flat to down 1%. Raytheon sales rose 6%, with reported operating profit up 74% on the divestiture gain and adjusted operating profit up 8%. Net debt and liquidity remained manageable, with cash of $5.6 billiond and total debt of roughly $42.7 billion at quarter end.
02—Key points
Key Highlights
- Sales grew 12% year over year to $19.3 billion, with organic growth also at 12%, and the company booked over $25 billion of new orders.
- Record total backlog of $202 billion ($125 billion commercial, $77 billion defense), with a Q1 book-to-bill of 1.34.
- Reported GAAP EPS of $1.28 (up 32%) was inflated by non-recurring items, including a $0.21 tax audit benefit and an $0.18 divestiture gain; adjusted EPS of $1.34 rose 10%.
- Adjusted net income was flat at $1.8 billion as segment profit growth was offset by higher interest expense and lower pension income.
- Free cash flow was negative $125 million (operating cash flow of $342 million), a sharp improvement from negative $1.4 billion a year earlier, but still well below the full-year target.
- Full-year 2024 guidance was reaffirmed: sales of $78.0-$79.0 billion, adjusted EPS of $5.25-$5.40, and free cash flow of about $5.7 billion.
- A $175 million charge at Collins Aerospace for alternative titanium sourcing followed new Canadian sanctions on Russian-owned suppliers; management views it as non-recurring.
03—Questions
Frequently Asked Questions
Did RTX's GAAP EPS growth reflect underlying operating performance?
Only partly. Reported GAAP EPS of $1.28 rose 32%, but it included net benefits from tax audit settlements, a divestiture gain, and other non-recurring items, partly offset by acquisition accounting charges and a titanium-sourcing charge. Adjusted EPS of $1.34, up 10%, is the better gauge of underlying earnings power, and adjusted net income was flat year over year.
Is RTX on track to meet its 2024 free cash flow target?
Management reaffirmed approximately $5.7 billion of free cash flow for 2024, but Q1 free cash flow was negative $125 million. The company needs a substantial cash generation ramp over the remaining three quarters, so investors should watch working capital, contract assets, and inventory trends in coming quarters.
What is driving the record backlog and what are the key defense orders?
The $202 billion backlog reflects strong commercial aerospace demand ($125 billion) and defense bookings ($77 billion). Notable Q1 defense bookings included $1.6 billion of classified Raytheon orders, $1.2 billion for Germany Patriot production, and $818 million for NATO GEM-T production.
What caused the Collins Aerospace operating profit decline and is it a lasting problem?
Reported Collins operating profit fell 5% due to a $175 million charge from unfavorable purchase commitments and impairment tied to initiating alternative titanium sources after Canadian sanctions on Russian-owned suppliers. Excluding the charge, adjusted operating profit rose 16%, and management classifies the charge as non-recurring, though the sourcing shift itself warrants monitoring.
How did the Cybersecurity, Intelligence and Services divestiture affect results?
RTX received $1.3 billion in gross proceeds and recorded a pre-tax gain of about $375 million at Raytheon, or roughly $0.18 per share after items. This boosted reported Raytheon operating profit by 74%, but it is non-operational and excluded from adjusted results, so it should not be extrapolated into future performance.
04—Continue