RTX Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Peter Arment - Baird - Analyst : Yeah, thanks. Good morning, Chris and Neil and nice results. Chris, thanks for the details on tariffs, it's very helpful. Obviously, things are very dynamic. So I guess I'll ask a question related to the current defense environment, are you seeing the Rearm Europe effort as a big opportunity for Raytheon? Or does it change any of the timing of awards that you were looking at? And then I guess just overall, do you still expect the Raytheon

Question: Rob Stallard - Vertical Research - Analyst : Thanks so much. Good morning. Chris and Neil, obviously, a very fluid situation with the whole trade war thing. But in terms of the $850 million you've laid out here, is that a gross or a net number after you've applied these mitigations? And some of that, your peers earlier this morning said that they were essentially going to pass on cost as a surcharge to customers. What sort of ability do you have there, particularly on the commercial aerospace side of things? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, RTX.N - Q1 2025 RTX Corp Earnings Call

Question: Myles Walton - Wolfe Research - Analyst : Chris, you mentioned that the tariff side didn't assume changes in customer buying behavior or operational disruption. Could you maybe talk about those as elements of watch items, in particular, the China strategy as it relates to aircraft and aircraft parts? What your assumptions are there in terms of what they may or may not do? And then also relative to supply chain disruptions, where are you most focused to ensure that these tariff issues don't create supply chain disruptions?

Question: Myles Walton - Wolfe Research - Analyst : Thanks, Chris.

Question: Ronald Epstein - Bank of America - Analyst : So yeah, just recently, as you all know, we had the decision on the NGAD manned aircraft. Do you have any idea on NGAP when that could be -- because I would imagine it's going to be one of the XA engines from you guys or your competitor. Do you have any color on that?

Question: Scott Deuschle - Deutsche Bank - Analyst : Chris, have you seen any operational impacts of the SPS fire at either Collins or Pratt? And then for RTX, is most of that lost fastener capacity being made up by SPS itself on existing contracts? Or are you needing to get that demand filled by alternative suppliers? Thank you.

Question: Sheila Kahyaoglu - Jefferies - Analyst : Good morning Chris and Neil. I wanted to go back to tariffs, and I appreciate you guys have a pretty tough job in the trade surplus that aerospace has. So Neil, in your comments you mentioned the $850 million, I just want to clarify that's a net impact. And how do we think about that across the rest of Q2 to Q4 and across the segments? Is there any timing mismatch where it hits Collins first and Pratt in '26? Any detail you could provide?

Question: Seth Seifman - JPMorgan - Analyst : Good morning. Just wanted to ask about, -- apologies if you addressed this, but you mentioned not assuming changes in customer behavior, but just kind of the latest indications you're getting on order activity in the shorter cycle areas of Collins aftermarket? And what might be most exposed if we were to see a significant slowdown in air traffic for the rest of the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, RTX.N - Q1 2025 RTX Corp Earnings Call

Question: Jason Gursky - Citi Research - Analyst : Good morning, everybody. Neil, I was wondering if you -- just a clarification one, if you'd be willing to talk about the gross impact of tariffs. You've talked about the net impact here. And then, Chris, I'm wondering just to get your initial thoughts and take on some of the executive orders that REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, RTX.N - Q1 2025 RTX Corp Earnings Call have been coming out of the White House. It looks like they want to get engaged in procurement reform and maybe go off and rewrite federal acquisition regulation. Just kind of what should we be looking for from the outside? Is this necessarily a good thing to go see procurement reform and trying to cut down on red tape and speed up acquisition processes? Or are there some things that we should be on the watch for that might have unintended negative consequences for the industrial base? Thanks.

Question: Gautam Khanna - TD Cowen - Analyst : Yeah. Thank you. Good morning, guys. Wondering if we could switch to OE. I was curious, are you seeing any sort of production rate expectation declines on the A350 or other products? And then if you could just update us on supply chain constraints and how those have progressed? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, RTX.N - Q1 2025 RTX Corp Earnings Call I know you made some comments in the opening, but if you could just elaborate on 787 and some of the other areas that were long poles in the tent before?

Question: Kristine Liwag - Morgan Stanley - Analyst : Good morning, everyone. I mean Chris, Neil, the focus has been on the negative impact of tariffs. But I would imagine that in the discussion that the administration is having with other countries on how to close the US trade deficit, the aerospace and defense industry's role as a net exporter, I mean can't really be ignored. So I guess, first, are you having any discussions about that? And are you seeing any incremental demand from international orders from this? And second, a $1 trillion US defense budget kind of came under the radar a few weeks ago. Taking this into consideration, how much flexibility do you have in ramping up capacity?

Question: David Strauss - Barclays - Analyst : Thanks. Good morning. Just a follow-up, I think, on some questions that have been asked. First of all, on V2500, the shop visit assumption there this year, is that held? And how do you think V2500 shop visits would hold up in a flattish kind of flight hour environment if we go into a recession? That's the first question. And then second of all, on GTF and powder metal. Chris, you've talked about the ramp that you saw last year and are expecting this year on powder metal material and MRO capacity. How much do we ultimately -- or you ultimately need to see powder metal capacity and MRO capacity increase, beyond what you're thinking about for 2025 to be able to accomplish fixing all the 3,000 engines that need to have parts replaced? Thanks.

Question: Doug Harned - Bernstein - Analyst : Good morning. Thank you. Chris, over the last couple of years, you've had a really big increase in backlog at Raytheon. A lot of that's been helped by international, particularly Europe. When you look forward, looking at mid-single digit growth this year at Raytheon, it seems to be that you have an outlook that's well below what one might expect from that backlog growth. Can you comment on the timing in which we should see that backlog flow into revenues? And perhaps also how you're thinking about some of the Buy European movement inside Europe and how you're participating on the ground in Europe as well?

Question: Scott Mikus - Melius Research - Analyst : Chris, Neil, a quick question on Pratt. There's a labor negotiation with the vote on a contract in early May. I'm just wondering how you're approaching that and if there's any contingency plans put in place if there is a strike to still work down the GTF AOGs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, RTX.N - Q1 2025 RTX Corp Earnings Call

Question: Matt Akers - Wells Fargo - Analyst : Good morning, thanks for the question. Sorry to go back to tariffs, but I guess one question we're getting this morning is kind of why are you not able to pass through more of this $850 million, I guess, just either whether it's contract kind of escalation or just aftermarket pricing or kind of drawbacks because a lot of your product ultimately kind of gets exported? So is that not the right way to think about it? Or is there like a timing mismatch that maybe you get this back in the future? Or could you possibly do better than this if you are able to recover some of that?

Question: Noah Poponak - Goldman Sachs - Analyst : Neil, your full-year guidance for segment EBIT at Pratt and Collins, I think, implies the margins are pretty flat sequentially through the year, maybe even down a little at Collins. Can you talk about that? How much of that is actual pre-tariff fundamental drivers in the business? And how much of that is leaving cushion where you could therefore absorb tariffs if they stick? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 22, 2025 / 12:30PM, RTX.N - Q1 2025 RTX Corp Earnings Call

Question: Gavin Parsons - UBS - Analyst : Maybe just following through on Raytheon margins there. I think the guide for the full year implies about 10.5%, and I think that's with $100 million of productivity. So given you did 10.7% in the first quarter with $15 million of productivity. I guess, first, is there anything abnormal in that margin? And then second, longer term on Raytheon margins, anything that keeps you from achieving that 100 basis points of volume plus 100 basis points of productivity that you had been talking about a couple of years ago at the '23 Investor Day?

Question: Gavin Parsons - UBS - Analyst : Thanks.