RTX [RTX] opened 2024 with strong sales growth led by its commercial aerospace businesses and net income was higher on one-time gains that more than offset various charges.
Net income in the first quarter rose 20 percent to $1.7 billion, $1.28 earnings per share (EPS) from $1.4 billion (97 cents EPS) a year ago. One-time benefits included acquisition accounting adjustments, tax audit settlements, and $241 million from the sale of the Cybersecurity, Intelligence and Services business. These gains more than offset several charges, including $175 million due finding alternative titanium sources.
Excluding the puts and takes to the bottom line, adjusted net income of $1.8 billion ($1.34 EPS) was flat versus a year ago. Per share earnings topped consensus estimates by 11 cents.
Sales in the quarter were up 12 percent to $19.3 billion from $17.2 billion on growth across all three segments.
At the operating level, Pratt & Whitney led topline growth on commercial engines, followed by work on the F135 Engine Core Upgrade for the F-35 fighter, and commercial aftermarket work. The segment’s operating profit dipped a percent due to a gain a year ago on a contract matter, and higher research and development, and other expenses related to military aircraft engines.
Sales at the Collins Aerospace segment were also higher on commercial work and to a lesser degree defense business while profits fell on the titanium-related supplier charge.
Raytheon, RTX’s defense-focused segment, generated a 74 percent increase on profit on a 6 percent sales increase to $6.7 billion. The profit gain was driven by the sale of the cybersecurity business, followed by higher sales of Patriot missile systems, counter-drone systems, the NASAMS air defense system, and advanced technology programs.
Orders were strong at Raytheon in the quarter at $8.1 billion, resulting in a book-to-bill ratio greater than 1.2 times sales, and backlog of $53 billion, up $1 billion from the end of 2023 despite a $1.1 billion reduction related to the cybersecurity business.
RTX still expects organic sales at Raytheon to be up in the low- to mid-single digits this year. The expected passage by the Senate of military aid to Ukraine, Israel, and the Indo-Pacific theater offers opportunities in the areas of missiles, counter-drone, and air defense systems, Chris Calio, RTX’s president and chief operating officer, said on the company’s earnings call.
With the higher demand signal for missiles, Calio announced a $115 million expansion of the company’s missile integration facility in Huntsville, Ala., which will boost by 50 percent capacity for integrating and delivering “several of our critical munitions programs.”
Later Tuesday, RTX said the 26,000 square-foot expansion of the Redstone Raytheon Missile Integration Facility will add 185 jobs and be complete in 2025. The facility is the final integration point for nine variants of the Standard Missile family, and will handle the future Glide Phase Interceptor currently in development to counter hypersonic glide vehicles.
Supply chain constraints are easing at Raytheon, which saw material receipts up double-digits versus a year ago, helping to boost sales, margin, and reduce manufacturing bottlenecks, Neil Mitchill, RTX’s chief financial officer, said on the call.
RTX’s total backlog at the end of the first quarter stood at $202 billion, up 3 percent from $196 billion at the end of 2023. Defense backlog at the end of the quarter was $77 billion, down a percent from $78 billion in December.
The company’s operating margin was 11.4 percent versus 10.7 percent a year ago.
RTX’s financial outlook for 2024 is unchanged, with sales in the range of $78 billion to $79 billion, adjusted earnings between $5.25 and $5.40 EPS, and free cash flow of about $5.7 billion. Free cash was a $125 million outflow in the first quarter.