RTX [RTX] on Tuesday reported solid sales gains in its first quarter but earnings fell due to the divesture a year ago of its former Cybersecurity, Intelligence and Services business.
The company also outlined $900 million in potential tariff impacts to its operating profit in 2025 related to U.S. and reciprocal duties with major trading partners, in particular China, Canada, Mexico, and the European Union related to President Trump’s trade war with most of the world. Various mitigations such as pricing, operational actions, regulatory mechanisms, and others could soften the blow by about $50 million.
The situation remains “fluid” with “multiple variables,” Chris Calio, president and CEO of RTX, said Tuesday on the company’s first quarter financial results call. He said the various puts and takes on the tariff equation represent a “framework,” and for now the company’s 2025 guidance does not assume potential impacts from the tariffs.
“Generally speaking, the aerospace and defense sector has operated a duty free environment, and that has been instrumental to the industry maintaining one of the largest trade surpluses across American manufacturing industries for decades,” Calio said. He later cautioned that the estimates of the tariff impacts “don’t include secondary tariff related impacts, such as changes to customer demand.”
Supply chain overhangs that have dampened RTX’s sales and performance—in some cases dating back to the COVID 19 pandemic—continue to diminish, Calio said, highlighting improvements in structural castings used in aircraft engine, materials for the Raytheon defense segment, supplies for the Collins Aerospace segment, and increased supplies of solid rocket motors.
Overall, RTX buys about 65 percent of its products from domestic suppliers, Calio said. He also highlighted that in the last five years RTX has invested nearly $10 billion to improve its “domestic manufacturing footprint and capabilities,” and in 2025 plans to spend another $2 billion to “further increase our U.S. capacity.”
Net income was down 10 percent to $1.5 billion, $1.14 earnings per share (EPS), from $1.7 billion ($1.17 EPS) a year ago. Excluding acquisition accounting adjustments, restructuring costs, and other non-recurring items, adjusted earnings of $1.47 were up 10 percent and beat consensus estimates by 12 cents.
Sales increased 5 percent to $20.3 billion versus $19.3 billion. Excluding divestitures, revenue was up 8 percent organically, largely driven by commercial aftermarket work in the Collins and Pratt & Whitney segments. Defense sales within both segments were higher on C4I work, the Survivable Air Operations Center program, F-35 fighter program, engines for the Air Force’s KC-46 tanker, and the F135 Engine Core Upgrade program.
Revenue was down at Raytheon on the sale of the cyber business but absent the divestiture organic growth was 2 percent.
Net income slid 10 percent to $1.5 billion, $1.14 earnings per share (EPS), from $1.7 billion ($1.28 EPS). Excluding restructuring costs, acquisition accounting adjustments, and non-recurring items, adjusted earnings of $1.47 EPS were 12 cents higher than analysts’ estimates. Adjusted operating profits were higher across all three business segments.
RTX left its 2025 guidance intact. Free cash flow in the quarter was $792 million. Backlog stood at $217 billion consisting of $125 billion of commercial business and $92 billion defense.