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Call sheet · Q1'26

RTX (RTX)

Q1'26 earnings call · held April 21, 2026 · compared with the Q4'25 call · management-credibility review
11/12
Disclosure score
6 low flags
Financial quality
Bottom line
The sleeper story is the framework agreements - these aren't just big orders, they're a fundamental restructuring of defense contracting that gives RTX decade-long visibility and shifts CapEx risk to the government. While everyone focuses on the 25% backlog growth, the real value is in this new collaborative funding model. The binding constraint is now supply chain capacity, not their own production - they've solved their internal bottlenecks but need suppliers to step up for the next growth phase. Management's most revealing comment: 'Framework agreements incorporate a collaborative funding approach to preserve upfront free cash flow' - translation: the government is essentially financing their growth. My view changes if the framework agreements don't convert to firm contracts by Q3 or if supply chain constraints start limiting that 40% munitions growth rate.

The 30-second version

  • Framework agreements are the real story here, not just the backlog growth
  • Defense margins hit 12.2% at Raytheon with 150 bps expansion, driven by 'favorable program mix and increased productivity'
  • GTF AOGs down 15% with 23% MRO output growth, but they're still playing allocation games with Airbus

What changed this quarter

MetricQ4'25Q1'26Change
Adjusted Sales$24.2B (+12% YoY)$22.1B (+10% organic)Decelerated but still double-digit organic growth
Adjusted EPS$1.55 (+1% YoY)$1.78 (+21% YoY)Explosive 2000 bps acceleration
Free Cash Flow$3.2B$1.3B (+$500M YoY)Strong Q1 start, up from $800M prior year
Backlog$268B (+23% YoY)$271B (+25% YoY)Accelerated growth, now record high
Book-to-Bill1.56 full year1.14Strong quarterly ratio above 1.0
Raytheon Operating Margin11.5%12.2%Expanded 150 bps, hitting mid-teens target range
Collins Operating Margin16.2%17.1%Expanded 10 bps despite 130 bps tariff headwind
Pratt Operating Margin8.2%8.7%Expanded 70 bps despite 50 bps tariff headwind
GTF MRO Output+26% full year 2025+23% YoYMaintained strong double-digit growth pace
PW1100 AOGsDown 20% from 2025 highsDown 15% vs Q4Continued downward trajectory

Accountability tracked

8 new promises made4 narrative shifts flagged7 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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