Why did adjusted EPS grow only 1% in Q4 despite 12% sales growth?

Segment operating profit grew across all three segments on an adjusted basis, but this was offset by higher corporate expenses (adjusted corporate loss of $132M vs. $4M a year earlier), higher taxes (adjusted effective tax rate of 23.9% vs. 21.9%), and a prior-year benefit from the Middle East contract restart that did not recur. Pratt & Whitney's margin compression also limited profit growth despite its strong top-line gain.

What drove the strong free cash flow in 2025?

Operating cash flow rose 48% to $10.6 billion, supported by higher net income, growth in contract liabilities and accounts payable, and stock-based compensation. Capital expenditures were roughly flat at $2.6 billion, so free cash flow increased to $7.9 billion from $4.5 billion.

What are the key drivers of the 2026 outlook?

Guidance reflects continued organic growth of 5% to 6% from commercial aerospace aftermarket and OE demand, defense programs such as F135 and Patriot/GEM-T, and the sizable backlog. Adjusted EPS of $6.60 to $6.80 implies modest growth, which may be tempered by tariffs, mix, and corporate costs. Note that the company does not provide GAAP reconciliations for forward adjusted metrics due to variability in excluded items.

What risks should investors weigh from this filing?

The filing's forward-looking statements flag several risks: the powder metal issue requiring accelerated inspections of the GTF engine fleet, tariffs and trade measures, supply chain constraints, legacy legal and regulatory obligations under prior deferred prosecution agreements with DOJ and an SEC order, and potential impairment of goodwill and intangibles (about $85B combined on the balance sheet).

Did the divestiture program meaningfully affect results?

Yes, in part. Divestitures and portfolio changes reduced Collins' reported and adjusted sales growth, with acquisitions and divestitures lowering full-year organic-basis comparisons by about $1.2 billion. The Q4 reported operating profit at Collins also included a $214M gain from businesses sold, which is excluded from adjusted results.

RTX 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed January 27, 2026. Cited figures are marked; the original filing is the authoritative source.

RTX Corporation reported strong fourth quarter and full-year 2025 results on January 27, 2026, with sales, earnings and free cash flow all growing.

Fourth-quarter sales rose 12% to $24.2 billion^a (14% organically), and reported GAAP EPS was $1.19 versus $1.10 a year earlier. Adjusted EPS was $1.55, up only 1%, reflecting higher corporate expenses, a higher adjusted tax rate (23.9% vs. 21.9%), and the absence of prior-year one-time benefits. Full-year 2025 sales reached $88.6 billion (up 10%, or 11% organically), adjusted EPS was $6.29 (up 10%), and free cash flow was $7.9 billion, up $3.4 billion year over year.

Backlog stood at $268 billion^b, including $161 billion of commercial and $107 billion of defense. Segment performance was mixed in the quarter. Pratt & Whitney sales jumped 25% on higher commercial OE, aftermarket and F135 military volume, but adjusted operating margin contracted 130 basis points to 8.2%, partly due to aftermarket mix and tariffs.

Raytheon delivered the strongest margin improvement, with adjusted margin up 140 basis points to 11.6% on productivity and favorable mix. Collins Aerospace adjusted sales grew 3%, with commercial aftermarket up 13%, while adjusted margin declined 20 basis points to 15.8% amid divestitures and tariffs. Management guided to 2026 adjusted sales of $92.0 to $93.0 billion^c, organic growth of 5% to 6%, adjusted EPS of $6.60 to $6.80, and free cash flow of $8.25 to $8.75 billion.

The guidance implies modest EPS growth of roughly 5%^d to 8% and continued cash generation. Investors should monitor execution on the large backlog, Pratt & Whitney margin pressure, tariff costs, and legacy legal and regulatory matters referenced in the filing's risk factors, including the GTF powder metal issue and prior deferred prosecution agreements.

02—Key points

Key Highlights

Q4 2025 sales of $24.2B grew 12% (14% organic); adjusted EPS of $1.55 rose just 1% as corporate expenses and taxes offset segment profit gains.
Full-year 2025 adjusted EPS of $6.29 (up 10%) and free cash flow of $7.9B (up $3.4B) show strong cash conversion.
Record backlog of $268B ($161B commercial, $107B defense) provides multi-year revenue visibility.
Pratt & Whitney sales up 25% in Q4, but adjusted margin fell 130 bps to 8.2% due to aftermarket mix, tariffs and higher SG&A.
Raytheon adjusted margin expanded 140 bps to 11.6% in Q4 on productivity and favorable program mix.
2026 guidance: adjusted sales of $92–93B, organic growth of 5–6%, adjusted EPS of $6.60–$6.80, and free cash flow of $8.25–$8.75B.
Q4 GAAP EPS of $1.19 included $0.31 of acquisition accounting charges; the company completed the Simmonds Precision Products divestiture.

03—Questions

Frequently Asked Questions

Why did adjusted EPS grow only 1% in Q4 despite 12% sales growth?
Segment operating profit grew across all three segments on an adjusted basis, but this was offset by higher corporate expenses (adjusted corporate loss of $132M vs. $4M a year earlier), higher taxes (adjusted effective tax rate of 23.9% vs. 21.9%), and a prior-year benefit from the Middle East contract restart that did not recur. Pratt & Whitney's margin compression also limited profit growth despite its strong top-line gain.
What drove the strong free cash flow in 2025?
Operating cash flow rose 48% to $10.6 billion, supported by higher net income, growth in contract liabilities and accounts payable, and stock-based compensation. Capital expenditures were roughly flat at $2.6 billion, so free cash flow increased to $7.9 billion from $4.5 billion.
What are the key drivers of the 2026 outlook?
Guidance reflects continued organic growth of 5% to 6% from commercial aerospace aftermarket and OE demand, defense programs such as F135 and Patriot/GEM-T, and the sizable backlog. Adjusted EPS of $6.60 to $6.80 implies modest growth, which may be tempered by tariffs, mix, and corporate costs. Note that the company does not provide GAAP reconciliations for forward adjusted metrics due to variability in excluded items.
What risks should investors weigh from this filing?
The filing's forward-looking statements flag several risks: the powder metal issue requiring accelerated inspections of the GTF engine fleet, tariffs and trade measures, supply chain constraints, legacy legal and regulatory obligations under prior deferred prosecution agreements with DOJ and an SEC order, and potential impairment of goodwill and intangibles (about $85B combined on the balance sheet).
Did the divestiture program meaningfully affect results?
Yes, in part. Divestitures and portfolio changes reduced Collins' reported and adjusted sales growth, with acquisitions and divestitures lowering full-year organic-basis comparisons by about $1.2 billion. The Q4 reported operating profit at Collins also included a $214M gain from businesses sold, which is excluded from adjusted results.

04—Continue

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