RTX Q2'26 Conference Call Notes
Three things from RTX's call, starting with: The sleeper: International defense is becoming the margin story, not just a growth story
Three things that matter from RTX in its Q2’26 call:
The sleeper: International defense is becoming the margin story, not just a growth story: 48% of Raytheon’s backlog is now international (up 4 points YoY) with ‘better pricing and productivity’ per management, and $10B of H1 international awards vs $5B last year. This isn’t just volume; it’s structurally higher-margin business.
The obvious: Record backlog at $289B, but Pratt’s deliberately starving OE to feed aftermarket: OE sales DOWN 8% despite 15% more engine deliveries because they’re hoarding material for MRO shops. The binding constraint isn’t demand or production capacity; it’s material allocation strategy.
The red flag: Collins margins suspiciously flat despite ‘significant’ cost cuts: Management claims ‘structural cost reduction actions’ and ‘consolidating operations’ but Q2 margins only up 30bps YoY to 17.1%. Where’s the leverage on 13% organic growth?
Disclosure Quality: B | Financial Quality: B
Track RTX’s promise history and grade trend: callsheetdaily.com/tickers/rtx
Delta Sheet
▲ Revenue: $22.1B (10% organic YoY) → $24.7B (16% organic YoY) (+600bps organic acceleration)
- Adjusted EPS: $1.78 (+21% YoY) → $1.89 (+21% YoY) (Growth rate maintained)
▲ Free Cash Flow: $1.3B → $2.9B (+123% sequential surge)
- Backlog: $271B (+25% YoY) → $289B (+22% YoY) (Growth decelerating but absolute adds strong)
▲ Raytheon Operating Margin: 12.2% → 12.6% (+40bps expansion)
▼ Pratt Operating Margin: 8.7% → 8.3% (-40bps compression)
▼ Collins Operating Margin: 17.1% → 17.1% (Dead flat despite growth)
▲ GTF AOGs: Down 15% from year-end → Down 25% YTD (Accelerating improvement)
▲ GTF MRO Output: +23% YoY → +43% YoY (Near doubling of growth rate)
▲ Raytheon Book-to-Bill: 0.96x → 2.42x (Massive surge on Patriot orders)
▲ Commercial Aftermarket Sales: +14% YoY → +18% YoY (+400bps acceleration)
▲ Defense Sales Growth: +9% YoY → +16% YoY (+700bps acceleration)
▲ Powder Metal Compensation: $170M → $150M (Declining as expected)
