The RTX First Quarter 2024 Earnings Conference Call is being held, with Greg Hayes, Chairman and CEO, and other executives in attendance. The call will discuss results from continuing operations and remind listeners of the risks and uncertainties involved. Chris Calio will be taking over as CEO next week, and the company has seen strong sales and profit growth, as well as a record backlog of over $200 billion.

Chris Calio, CEO of RTX, expresses his appreciation for Greg's leadership and the strong foundation he has built for the company. He highlights the industry-leading positions of Collins, Pratt, and Raytheon, and their potential for long-term growth in the aftermarket and defense sectors. The company's focus moving forward is to transform into the best company in A&D.

The company strives to be a trusted partner to its customers, leveraging its operating system for operational excellence and providing differentiated technologies for a competitive advantage. The quarter showed strong growth in commercial and defense segments, with continued demand for new aircraft and a solid backlog. The recent defense budget supports key programs and technologies, including next generation propulsion and countermeasures for current and future threats.

The progress on the Ukraine supplemental bill is encouraging and will allow the DoD to deepen critical US munition stockpiles and provide air defense capabilities to the region. Raytheon was awarded a $1.2 billion contract to supply Germany with additional Patriot systems. The GTF fleet management plan remains on track and the results from ultrasonic angle scan inspections have been as expected. All GTF engines being delivered have full-life disks and MRO efforts are ramping up. The average wing-to-wing turnaround time is expected to be 250-300 days and there will be an average of 350 AOGs from 2024-2026. Support agreements have been reached with nine customers.

The company is leveraging their core operating system to drive continuous improvements and enhance their factories through digitization and automation. They have seen success in their nacelle business and on the TPY-2 program, and plan to connect 20 more factories by the end of the year. They are also investing in R&D and expanding manufacturing capacity to meet customer demand.

In the first quarter of the year, RTX saw strong performance in key financial metrics, with sales increasing by 12% and backlog growing by 12% as well. The company also completed the sale of its cybersecurity business and made progress on deleveraging its balance sheet. Segment operating profit grew by 10%, but was partially offset by expected challenges from lower pension income and higher interest expense.

In the first quarter, the company's effective tax rate included a foreign tax benefit and adjusted earnings per share increased by 10%. On a GAAP basis, EPS from continuing operations included various adjustments, resulting in a net gain. Free cash flow was in line with expectations and improved significantly from the previous year. Raytheon saw margin improvement and increased material receipts, while Collins focused on driving incremental margins through growth and cost reduction.

Collins had a strong quarter with 9% sales growth and margin expansion. They expect future volume increases to drive cost absorption benefits and have made progress in cost reduction. They also achieved $105 million in merger cost synergies and are on track to meet their full year outlook. In the quarter, sales were driven by commercial aftermarket and OE, with a 14% increase in both. Defense sales were also up 1%.

The adjusted operating profit for Collins was $1.05 billion, a 16% increase from the previous year. Sales are expected to continue growing in the mid to high single-digits for the full year. Pratt & Whitney also saw a 23% increase in sales, with growth in all three channels. However, adjusted operating profit remained flat due to increased expenses and the absence of a previous contract benefit.

Pratt's full year outlook predicts low double-digit sales growth and a $400-$475 million increase in adjusted operating profit. Raytheon's sales and operating profit increased in the first quarter due to higher volume and improved productivity. Bookings and backlog remain strong. The overall backlog for the company is at a record $202 billion and the focus is on executing this backlog and driving operational performance.

The company's main priorities for the year are still the same, including executing the GTF fleet management plan at Pratt, delivering backlog and improved margins at Raytheon, and generating strong incremental margins at Collins. The company's core operating system supports these priorities and drives continuous improvement. The company is also investing in research and development, modernization, and digital capabilities, while evaluating the portfolio for future investments. The company remains on track to return $36 to $37 billion of capital to shareholders from the merger through next year. The Investor Relations team is undergoing a leadership transition, with Nathan Ware taking over from Jennifer Reed. The company is now ready for questions from investors.

Neil and Chris discuss the Pratt aftermarket and its performance in the first quarter. They mention that the 9% growth was expected and that they are confident in achieving low double digits for the full year. They also mention that there were fewer shop visits for the V2500, but they still expect to hit 800 for the year. They also mention that there will be more content and better drop through on legacy aftermarket. Chris adds that they came out strong on GTF MRO and saw the results in the first quarter.

Chris Calio, speaking on behalf of Pratt & Whitney, discusses the progress of the GTF fleet management plan and the key enablers that are being monitored. These include AOG levels, turnaround times, and MRO output, with a focus on material flow and the use of new powdered metal parts. The plan is a multiyear process and the company is committed to staying within or moving to the lower end of the ranges for these enablers.

The company is focused on ramping up production in MRO to reduce the number of aircraft on ground (AOG) days. This will help improve the fleet's performance and reduce penalties. They are currently at peak AOG and expect to gradually decrease this number by improving MRO output and turnaround times.

Chris Calio discusses the recent supplemental that has been passed by the House and how it will benefit Raytheon's defense business. He breaks down the $60 billion for Ukraine, $25 billion for Israel, and $10 billion for INDOPACOM and explains how two-thirds of the Ukraine budget is addressable with RTX products. He also mentions the challenges with the fixed development program within missiles and how it fits into Raytheon's overall productivity story.

The company saw improvements in productivity in the first quarter and expects to see a $200 million year-over-year improvement. They have made progress in their classified programs and fixed price contracts but still have more work to do. The first quarter saw a 23% gain at Pratt, but they are expecting a sharp deceleration for the rest of the year. They are still guiding for low teens growth in the aftermarket, but there may be a flat to down year in commercial or military. The company had a strong start to the year.

In the first quarter, commercial OE deliveries drove a 40% increase in the top line for the company, with a good mix between installs and spare engines. This is expected to moderate throughout the rest of the year. The aftermarket side will see mid-single-digit growth, with V2500s and GTF aftermarket contributing to the top line. Military business also had a strong start in the first quarter, but is expected to slow down in the coming months. The company is holding onto its guidance for the year. On the topic of Collins, the company expects a 16.6% margin for the year, up from 15.7% in the first quarter. This will be driven by various factors, and the company also reported a $175 million impairment.

Neil Mitchill discusses the first quarter performance of Collins, highlighting a $145 million profit growth and the aftermarket as the key driver for future growth. He also mentions a $175 million charge related to procurement of titanium, which was necessary due to ongoing supply chain dynamics and sanctions imposed by Canada. The charge reflects higher purchase commitment costs resulting from new agreements with two suppliers.

The paragraph discusses two factors that have led to an impairment of $75 million in costs for a specific program. The first factor is the company's efforts to mitigate the potential impact of sanctions and restrictions through global sourcing strategies. The second factor is the retirement of a leader in the defense sector and the need for a new strategy to improve margins and drive growth in the space sector. The company has seen growth in material receipts and is focused on execution and supply chain management.

David Strauss of Barclays asked two questions during the earnings call. The first question was about the GTF plan and how many engines have seen full replacement at this point out of the 3,000 planned. The second question was about the agreement reached with Spirit Airlines and whether the amount agreed upon was representative of other customer agreements.

During a conference call, Chris Calio, the president of Collins Aerospace, discussed the progress of the company's three-year process to deliver full life powder metal parts to its customers' final assembly lines. He also mentioned that they are working to optimize work scopes for disc replacement and that early compensation numbers for customers are within the company's guidance. A question was raised about potential implications for the Collins business due to the 737 MAX situation, to which Calio responded that it is still early and they are closely monitoring the situation.

The speaker discusses the company's performance and outlook, mentioning uncertainty around rates and the team's efforts to support them. They also address questions about powdered metal processes and defense margins, stating that they faced headwinds last year and assumed no productivity for this year.

The speaker discusses the significant improvement in the company's performance compared to last year, which was driven by fixed price development programs. However, there is still work to be done to sustain this improvement and the focus is on improving the supply chain and meeting customer needs. The company has seen a significant increase in orders and healthy margins, with a majority of them being foreign sales. The other speaker adds that there will be a big increase in GTF shop visits this year, but does not provide specific numbers.

Chris and Neil discuss the strong performance of Raytheon in Europe, with a focus on the FMS mix and its impact on margins. They also touch upon the progress of fixed price development programs and their expected timeline. Peter Arment asks about the outlook for bookings in Europe and the potential for FMS mix to continue to benefit margins in the future.

In a recent conference call, Chris Calio of Raytheon discussed the company's multi-year process and strong demand for integrated air missile defense. He also mentioned that Raytheon's margin progression story is expected to benefit from an increase in international backlog, which made up 60% of their Q1 bookings. In regards to Pratt aftermarket, it was clarified that the mid-single digit growth mentioned earlier was actually mid-teens. Calio also stated that the current wing-to-wing turnaround time for GTF full stop visits is in the range of 250-300 days, with a mix of 90% heavy and 10% lighter shop visits.

Chris Calio, the speaker, is addressing a question about the pipeline for Raytheon, a defense company. He states that the company will continue to see strong growth and bookings due to the current threat environment. He mentions specific regions where the demand for their products is strong, such as the US, Europe, and Asia.

The company is planning to bring advanced capabilities to the market, such as LTAMs, 360-degree radar, AMRAAM refresh, SPY-6 radar, counter-UAS capabilities, and high-power microwave. There is strong demand for existing products and investments are being made for next generation products to meet emerging threats. The book-to-bill ratio is expected to be over 1.1 for this year and strong for next year, with potential awards for AMRAAM, LTAMDS, Patriot, SPY-6, and SM-3. The backlog is expected to continue growing, but international orders can be unpredictable.

Greg Hayes, CEO of RTX, thanks his team and investors for their support over the past decade. He acknowledges the hard work and dedication of the entire team and the transformation of United Technologies into RTX, which he believes is the best positioned A&D company in the world.

The speaker discusses the strengths of their company, including their products, portfolio, and backlog. They praise Chris as the new leader and express their support for him. They also thank Jennifer for her contributions and announce that the conference is now over.

This summary was generated with AI and may contain some inaccuracies.