RTX 2026年第3四半期決算説明会：業績見通しを上方修正、受注残高は3,400億ドルに到達

主要なポイント

• RTXが発表した2026年第3四半期の調整後売上高は、前年同期比11%増、オーガニックベースで12%増の250億ドルとなりました。商用OEM（新機向け装備品）、商用アフターマーケット、防衛の全部門が2桁のオーガニック成長を達成しました。
• 調整後EPS（1株当たり利益）は、IEEPA（国際緊急経済権限法）に基づくコスト回収による0.25ドルのプラス効果を含め、33%増の2.26ドルとなりました。フリーキャッシュフローは21億ドルでした。
• 受注残高は前年同期比36%増、前四半期比18%増の3,400億ドルと過去最高に達しました。防衛関連の受注額は590億ドル近くに達し、商用関連の受注額は220億ドルを超えました。
• 経営陣は、通期の調整後売上高見通しを970億〜975億ドル、調整後EPS見通しを7.65〜7.75ドル、フリーキャッシュフロー見通しを90億〜92億ドルに引き上げました。
• レセオン（Raytheon）部門の受注額は523億ドルに達し、当四半期末の受注残高は1,300億ドルとなりました。複数年にわたる弾薬契約は、今後数年間にわたり収益成長を支えると見込まれ、生産拡大に伴い利益率の向上につながる可能性があります。
• プラット・アンド・ホイットニー（Pratt & Whitney）部門は、PW1100のMRO（整備・修理・オーバーホール）整備量を前年同期比で35%以上増加させました。経営陣は第4四半期に地上待機（AOG）機数が減少するとの見通しを維持しており、来年初めにはMRO整備入庫に合わせてGTFホットセクション・プラス・アップグレードを導入する計画です。

主要財務データ

事業および業績の動向

コリンズ・エアロスペース

コリンズ部門の四半期売上高は84億ドルとなり、調整後ベースで10%増、オーガニックベースで12%増となりました。事業売却の影響を除く商用OEM売上高は、単通路機（ナローボディ）および複通路機（ワイドボディ）の出荷量増加に支えられ、23%増加しました。

商用アフターマーケット売上高は9%増加し、このうち改修・アップグレードが18%増、初期備品供給が12%増、部品および修理が7%増となりました。防衛売上高は7%増加しました。

調整後営業利益は5億9,400万ドル増の18億ドルとなりました。利益率は560ベーシスポイント上昇し、これにはIEEPA回収による300ベーシスポイントのプラス効果が含まれています。経営陣は、拠点の統合、低コスト地域での製造拡大、オーバーヘッド層の削減といった構造的取り組みは、依然として比較的初期段階にあると述べました。

プラット・アンド・ホイットニー

プラット部門の売上高は10%増の92億ドルとなりました。GTFのMRO整備量の増加を主因として商用アフターマーケット収益は21%増加した一方、大型エンジンの構成比変化により商用OEM売上高は5%減少しました。軍用エンジン売上高は2%増加しました。

調整後営業利益は2億1,700万ドル増の9億6,800万ドルとなりました。10.5%の利益率には、IEEPA回収による170ベーシスポイントのプラス効果が含まれています。

PW1100のMRO整備量は、第3四半期に前年同期比で35%超増加し、年初来累計では30%超増加しました。地上待機（AOG）機数は前四半期比で比較的安定して推移しており、経営陣は第4四半期に減少すると見込んでいます。GTF Advantageエンジンを搭載した最初の航空機がユナイテッド航空で就航し、ホットセクション・プラス・パッケージは来年初めのMRO整備入庫から適用される見通しです。

RTXは年初来で800基以上のGTFの注文およびコミットメントを獲得し、同エンジンの受注残高は8,000基を超えました。

レセオン

レセオン部門の売上高は、パトリオット、スタンダードミサイル、トマホークなどの海軍プログラムや陸上・防空システムが牽引し、14%増の80億ドルとなりました。調整後営業利益は、生産性向上、出荷量増加、良好なプログラム構成比に支えられ、2億7,500万ドル増の11億ドルとなりました。

受注額は合計523億ドルで、ブック・トゥ・ビル比率は6.54、受注残高は1,300億ドルとなりました。重要弾薬の生産量は前年同期比で90%以上増加しました。

RTXによると、確定契約に移行した弾薬包括フレームワーク協定の総額は約700億ドルに達し、10年近くにわたる需要の見通しが得られるとしています。生産ペースは2〜4倍に増加する見込みで、収益はプログラムにコストが計上されるのに伴って認識されます。

海外需要も引き続き堅調に推移しました。レセオンにおける年初来の海外注文は前年同期比で2.5倍に増加しました。海外プログラムは受注残高全体の37%を占めており、新規追加されたトマホークおよびAMRAAM契約を除くと52%に達します。

業績見通し（ガイダンス）

経営陣は現在、商用OEM売上高が1桁台後半のペースで成長し、商用アフターマーケット売上高は10%台前半の成長、防衛売上高は10%台前半のペースで増加すると見込んでいます。

個別の事業別では、RTXはコリンズの調整後売上高が1桁台後半の成長となり、営業利益が2025年比で9億2,500万〜9億7,500万ドル増加すると見込んでいます。プラットの売上高は1桁台後半の成長、営業利益は4億7,500万〜5億2,500万ドルの増加が見込まれます。レセオンの売上高は10%台前半の成長、営業利益は8億〜8億5,000万ドルの増加が見込まれます。

2026年以降について、経営陣は2027年も引き続き収益と利益の成長、営業利益率の改善、フリーキャッシュフローの拡大を見込んでいます。2027年の詳細なガイダンスは、1月に予定されている第4四半期決算説明会で発表される予定です。

リスクおよび注目ポイント

• RTXは3,400億ドルの受注残高に対応するために生産能力を拡大しており、オーガニック売上高の増加に伴い運転資本需要が発生する可能性があります。
• サプライチェーンからの部品調達状況は、計画している弾薬の増産において引き続き中心的な課題です。経営陣は具体的にプリント基板、コンデンサ、抵抗器、鋳物、ロケットモーター、重要鉱物について言及しました。
• 米国政府はつなぎ予算（継続決議）の下で運用されており、今後の防衛予算の時期や内容には不透明感が残っています。RTXは、自社の弾薬契約には予算や生産量の変更に対する保護条項が含まれていると述べています。
• ジェット燃料コストの上昇や航空機の運航減少の可能性は、商用アフターマーケット需要に影響を与える可能性がありますが、経営陣は現在の需要を堅調であると説明しています。
• IEEPA回収は第3四半期の利益、利益率、キャッシュフローに大きなプラス効果をもたらしました。経営陣は第4四半期の追加キャッシュ回収額を約5,000万ドルにとどまると見込んでおり、それ以降はこの効果がほぼ収束する見通しです。
• 粉末金属問題に関する補償金の支払いは減少傾向にありますが、GTFフリートの管理、MRO能力、地上待機（AOG）機数は、引き続き重要な運用変動要因です。

アナリスト質疑応答のハイライト

弾薬事業の売上高と利益率：経営陣は、新規契約が今後2年間で本格化し、契約済み弾薬ポートフォリオ全体のフル生産が見込まれる2030年まで拡大が続くと予想しています。出荷量の増加とサプライチェーンの可視性向上が、レセオンの利益率拡大を後押しする可能性があります。

キャッシュコンバージョン：RTXは引き続き、調整後純利益の90%〜100%に相当するフリーキャッシュフローを目標としています。経営陣は2027年に粉末金属補償金の減少により約5億ドルの追い風を見込む一方、IEEPA還付の終了、推計1億ドルの年金関連の逆風、潜在的な運転資本投資によって相殺されると予想しています。

コリンズの利益率：経営陣は、第3四半期の営業業績は極めて健全であり、開示されたIEEPA回収以外に特別な異例の要因はなかったと述べました。第4四半期の利益率は、研究開発費やデジタル投資の増加、商用OEM出荷量を反映する見込みですが、営業利益率の拡大傾向は2027年に向けて継続すると予想されています。

プラットの収益性とキャッシュフロー：経営陣は、プラットが長期的に10%台前半から半ばの利益率を達成できるポジションにあることを再強調しました。GTFアフターマーケットの成長、価格設定、整備入庫時支払い契約が段階的な利益率改善を支え、今後3年間のフリーキャッシュフローの追い風になると予想されています。

GTFの契約構造：GTF契約の約80%は長期契約（LTA）であり、経営陣はその大半が整備入庫時支払い条件を採用していると述べました。フルインターバルの整備入庫が増えて現金支払いが生成されるにつれ、プラットの契約資産は今後3〜5年で減少すると見込まれています。

決算説明会トランスクリプト全文

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決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to the RTX Third Quarter 2026 Earnings Conference Call. My name is Latif, and I will be your operator for today. As a reminder, this conference is being recorded for replay purposes. On the call today are Chris Calio, Chairman and Chief Executive Officer. Neil Mitchill, Chief Financial Officer; and Nathan Ware, Vice President of Investor Relations. This call is being webcast live on the Internet, and there is a presentation available for download from RTX website at www.rtx.com.

Please note, except where otherwise noted, the company will speak to results from continuing operations excluding acquisition, accounting adjustments and net nonrecurring and/or significant items often referred to by management as other significant items. The company also reminds listeners that the earnings and cash flow expectations and any other forward-looking statements provided in this call are subject to risks and uncertainties.

RTX SEC filings, including its forms 8-K, 10-Q and 10-K, provide details on important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Once the call becomes open for questions, we ask that you limit your first round to 1 question per caller to give everyone the opportunity to participate. [Operator Instructions] With that, I will turn the call over to Mr. Calio.

Christopher Calio

Thank you, and good morning, everyone. Our continued execution and operational focus enabled us to deliver another very strong quarter of results across RTX. On the top line, adjusted sales were $25 billion, up 12% organically with double-digit growth across commercial OE, commercial aftermarket and defense. Adjusted EPS of $2.26 was up $0.56 or 33% year-over-year including $0.25 from IEEPA cost recovery. And free cash flow was again strong at $2.1 billion. So overall, we're very pleased with the continued momentum in our operational performance across the company in Q3.

We also continue to see robust global demand for our products and services and are very well positioned to meet our growing customer needs across commercial aerospace and defense. RTX ended Q3 with another record backlog of $340 billion, up 36% year-over-year and 18% sequentially. On the defense side, we booked nearly $59 billion of awards with a book-to-bill of 4.57, driven by approximately $23 billion for Tomahawk and over $14 billion for MRAM as we converted those framework agreements into multiyear production contracts at Raytheon.

And earlier this month, we also signed multiyear contracts for SM-6 and SM-3 1B. We're very pleased with our collaboration with the Department of War on these contracts, which reinforced the need for our highly capable and proven systems, and they will be a significant revenue driver for Raytheon over the next decade. Neil will provide some more details in a few minutes. On the commercial side, we received over $22 billion of new orders in the quarter, representing over 60% year-over-year growth across both OE and aftermarket.

Most notably, Pratt announced significant GTF engine orders and commitments, including British Airways selection of the GTF to power up to 63 aircraft, adding another new GTF operator to its expanding fleet. So far this year, we've received over 800 GTF orders and commitments and have a backlog of over 8,000 engines. And commercial orders at Collins were up over 20% year-over-year, driven by the growing installed base and breadth of its content offerings. So another strong quarter of awards across the company.

Okay. Let me shift to the current operating environment as we look to close out the year. In Commercial Aerospace, we continue to see positive trends with increasing OE production rates on key platforms, which is growing our installed base. For example, Collins' commercial installed base and Pratt's narrowbody powered fleet have grown mid-single digits year-over-year. In Q3, commercial aftermarket also remained resilient with 16% organic growth despite global RPKs declining slightly year-over-year. .

Our MRO demand continued to be strong and engine retirements were in line with our expectations. Additionally, we continue to see strength across business aviation with global business jet departures up year-to-date. And as a reminder, about 60% of the Pratt Canada fleet has not yet seen a first shop visit. On the defense side, we remain exceptionally well positioned to meet growing demand, given our proven capabilities regional partnerships and ability to produce at scale. In the U.S., we're encouraged by the broad support for defense spending, including the need to expand munitions depth and integrated air and missile defense capabilities. and our ongoing discussions with the Department of -- or give us further confidence that our key programs will remain funding priorities. Internationally, demand is also rising with defense budgets expected to grow across the European, Asia Pacific and MENA regions next year, including significant spending by Germany, Poland and Japan.

Across these regions, we have partnerships with local companies and suppliers that help support the production of key systems, including Patriot, GMT, standard missile, Coyote and military engines. In Europe, for example, we have over 130 different suppliers that support our production work in that region. And while the U.S. government is currently operating under a continuing resolution, our record backlog provides clear visibility to our sales expectations in the fourth quarter and throughout next year. So our focus remains squarely on execution.

Overall, based on our performance to date, we're again raising our full year outlook for adjusted sales, EPS and free cash flow. Neil will take you through the details of the third quarter and our updated outlook in a few minutes. But first, let me provide an update on our strategic priorities on Slide 4.

I'll start with operational execution. We continue to leverage our core operating system to drive output and productivity across the company. At Pratt, we're making progress across key GTF initiatives. On the GTF fleet management plan, the financial and technical outlook remains on track. PW1100 MRO output was up over 35% year-over-year in the quarter and is up over 30% year-to-date.

Sequentially, AOGs were relatively stable as this MRO output largely offset the expected engine removals from the seasonally high utilization of the fleet during the summer months. We continue to expect AOG reductions in Q4. We're also pleased that the first GTF advantage powered aircraft was delivered to United Airlines and entered into service earlier this month. As a reminder, the advantage will double the time on wing performance and we expect the production ramp to continue next year. We're also progressing certification of the hot section plus upgrade package that will bring 90% to 95% of the Advantage time on wing benefit back to the installed base, and we will start incorporating this package into MRO visits early next year.

Shifting to Collins. We're advancing structural cost actions to support further margin expansion. This includes consolidating operations, increasing manufacturing hours at best cost locations and reducing overhead layers. Enabled by these actions, Collins has delivered double-digit organic sales growth this year while reducing indirect labor headcount.

And at Raytheon, we're increasing munitions output as we improve material flow across the supply chain and drive productivity in our operations. Year-to-date, output across our critical munitions is up over 90% year-over-year with material receipts at Raytheon up double digits over the same period. Across RTX, we're also deploying AI and digital tools to improve speed in decision-making in our operations. For example, through a recent acquisition, Pratt is integrating AI-powered engine inspection software to accelerate boroscope analytics.

Already in use on legacy programs, this capability is being implemented across our MRO networks and has reduced overall inspection time by more than 30% where it's been deployed.

Next is innovation and future growth. In Q3, we invested $2.8 billion in company and customer-funded research and development and CapEx to advance our technology road map and expand capacity. On the technology front, we're innovating to meet our customers' evolving needs. We're continuing to develop products with AI and machine learning capabilities. For example, Collins is leveraging AI in certain products to assist air traffic controllers in making faster and smarter decisions.

And Raytheon has sensors deployed in the field that are using AI to identify objects and classify threats. Also in the quarter, Collins completed altitude testing of its next-generation enhanced power and cooling system, known as EPACS. EPACS delivers a significant increase in cooling capacity across critical aircraft systems is being offered to support technology upgrades on the F-35. It can also be used on other future defense and commercial aircraft platforms.

And Raytheon is progressing its composable weapon strategy to address the evolving needs of our customers. This construct uses proven technologies from across our product portfolio as building blocks to develop new solutions that we can feel at a faster scale. For example, we're developing a new effector where we're taking the rocket motor and steering control from 1 production program and combining it with the seeker from another program to cost effectively meet a specific mission requirement on an accelerated time line.

On the capacity front, we continue to invest to support higher output levels. In the quarter, Raytheon completed a $50 million expansion of its manufacturing facility in Forest, Mississippi. This investment will support production ramps for the next-generation Jammer program and other radar systems. And in connection with the munitions contracts that I mentioned earlier, we're making incremental investments in our supply chain and operations to ramp capacity and support significantly higher production rates.

On the commercial side, Collins announced a new partnership with Etihad Engineering to expand MRO services in the Middle East. This agreement will double Collins' footprint for nacelle services in the region and support growing A350 and 787 fleets. And Pratt announced an expansion of precision parts manufacturing in Poland.

This investment will increase capacity of complex component assembly for both commercial and military engines, including the GTF and F135. And so we're pleased to see that our disciplined focus on our strategic priorities is delivering operational improvement and new capabilities for our customers.

Finally, I want to acknowledge the leadership update we announced last month. As you saw, Shane Eddy has decided to retire from the company after more than 40 years in the aerospace and defense industry. Shane has been a great partner in teammate, and I want to thank him for his leadership at Pratt. We're fortunate to have a very strong bench and are excited that Jill Albertelli is taking over as the President of Pratt & Whitney. Jill is currently the President of Military engines and brings over 3 decades of experience across Pratt Okay. With that, I'll hand it over to Neil to take you through the third quarter results and our updated outlook in more detail. Neil?

Neil Mitchill

All right. Thanks, Chris. I'm on Slide 5. In the third quarter, adjusted sales of $25 billion were up 11% year-over-year on an adjusted basis and 12% organically. This strong top line organic growth was driven by all 3 channels, with commercial OE up 10%, commercial aftermarket up 16%; and Defense up 10%. Adjusted segment operating profit of $3.9 billion was up 39% year-over-year driven by drop-through on higher sales volume across the company, improved productivity at Raytheon and IEEPA cost recovery. Segment margins expanded 310 basis points year-over-year including the benefit of approximately 160 basis points from IEEPA.

Adjusted earnings per share of $2.26 was up 33% from the prior year driven by about $0.43 of operational segment profit growth and approximately $0.25 of IEEPA recovery. This growth more than offset roughly $0.12 below the line items primarily from an expected higher tax rate and lower pension income.

On a GAAP basis, earnings per share from continuing operations was $1.89 and included $0.26 of acquisition accounting adjustments and $0.11 of restructuring and all other nonrecurring items. Free cash flow in the quarter was $2.1 billion and included approximately $165 million of powder metal related compensation and approximately $300 million of IEEPA recovery.

As Chris mentioned, we converted 4 munition framework agreements into undefinitized contracts. Over the next several years, Baytown will be focused on ramping the supply chain, our operations and capacity to meet the associated production requirements. As a reminder, these contracts include a funding approach that will essentially preserve upfront free cash flow.

We'll be making CapEx and other investments on these contracts over the next 2 to 3 years and we'll recognize revenue as costs are charged to the programs. Therefore, we expect to see sales and profit contributions over the next several years as we capacitize and then ramp to achieve full rate production over the multiyear terms of each contract. And over time, these contracts have the potential to support margin expansion at Raytheon as we scale production.

So overall, we delivered strong financial performance across RTX and we're pleased with the significant growth in our backlog.

Let's turn to Slide 6, and I'll take you through our updated outlook for the full year. Given our performance to date as well as the IEEPA recovery, we are increasing our full year outlook. On the top line, we're raising our full year adjusted sales outlook by $2 billion on the low end and $1.5 billion on the high end to a new range of $97 million to $97.5 billion, up from our prior range of $95 million to $96 billion.

The sales increase is driven by continued defense performance, commercial OE strength at Collins and higher GTF aftermarket volume at Pratt. This translates to full year RTX organic sales growth of between 10% and 11%, up from our prior range of between 8% and 9%. By channel, we now expect commercial OE sales to grow high single digits which is at the higher end of our prior expectation of mid- to high single digits, driven by the production ramp at Collins.

Within commercial aftermarket, we now expect sales to grow low double digits to low teens across the company, which is up from our prior expectation of low double digits driven by higher GTF aftermarket volume. And for defense sales, we now expect low double-digit growth, up from our prior range of high single digits primarily driven by the performance at Raytheon.

On the bottom line, we are increasing our outlook for adjusted earnings per share by $0.55 on the low end and $0.50 on the high end. We now see adjusted EPS of between $7.65 and $7.75 for the full year, up from our prior range of $7.10 to $7.25. At the midpoint of our updated outlook, this increase is primarily driven by approximately $0.28 of performance across the company and approximately $0.25 of IEEPA recovery. We've included the updated outlook for the associated below-the-line items in the appendix of our webcast.

Finally, we now expect free cash flow to be between $9 billion and $9.2 billion for the full year, up from our prior range of $8.5 billion to $8.75 billion, driven primarily by IEEPA recovery. As we look beyond this year, based on the fundamentals of our company, our record backlog position and operating momentum we expect another year of top and bottom line growth, improving operational margins and strong free cash flow generation. And as we do every year, we'll be back on our fourth quarter call in January with our detailed outlook for 2027. With that, I'll hand it over to Nathan to take you through the segments in more detail. Nathan?

Nathan Ware

Thanks, Neil. Starting with Collins on Slide 7. Sales were $8.4 billion in the quarter, up 10% on an adjusted basis and 12% organically, driven by strength across all channels. Excluding divestitures, Commercial OE sales were up 23%, driven by higher volume on narrow-body and wide-body platforms.

Commercial aftermarket sales were up 9%, driven by an 18% increase in modern upgrades, a 12% increase in provisioning and a 7% increase in parts and repair. Defense sales were up 7% versus the prior year, driven by higher volume across multiple programs. Adjusted operating profit of $1.8 billion was up $594 million versus the prior year, driven by drop-through on higher commercial volume, commercial mix and approximately $250 million of IEEPA recovery.

In the quarter, Collins expanded margins by 560 basis points year-over-year, including the benefit of structural cost actions and 300 basis points of IEEPA recovery. Turning to Collins full year outlook. Based on year-to-date commercial OE performance, we now expect sales to grow high single digits on an adjusted basis versus our prior range of mid- to high single digits. Organically, we now expect low double-digit growth versus our prior range of high single digits to low double digits.

With respect to operating profit, we now expect growth between $925 million and $975 million versus 2025, up from our prior expectation of between $550 million and $625 million, driven by the drop-through on increased sales volume, ongoing structural cost reduction initiatives and approximately $250 million of EPA recovery.

Shifting to Pratt & Whitney on Slide 8. Sales of $9.2 billion were up 10% on an adjusted and organic basis, driven by strength in commercial aftermarket. Commercial OE sales were down 5%, driven by large commercial engine mix. Commercial aftermarket sales were up 21%, driven by higher MRO volume, primarily GTF.

In military engines, sales were up 2% driven by higher volume across multiple programs, partially offset by the prior year benefit from F135 contract award timing. Adjusted operating profit of $968 million was up $217 million versus the prior year, driven by drop-through on higher commercial aftermarket volume and approximately $160 million of IEEPA recovery. This was partially offset by large commercial OE engine mix, commercial aftermarket mix and higher SG&A expense.

In the quarter, Pratt's margins of 10.5% included 170 basis points of IEEPA recovery. Turning to Pratt's full year outlook. We continue to expect sales to grow high single digits on both an adjusted and organic basis, most likely towards the top half of this range given the strength in commercial aftermarket. With respect to operating profit, we now expect growth between $475 million and $525 million versus 2025, and up from our prior expectation of between $275 million and $350 million, driven by the drop-through on increased sales volume and approximately $170 million of IEEPA recovery.

Turning to Raytheon on Slide 9. Sales of $8 billion in the quarter were up 14% on both an adjusted and organic basis, driven by higher volume on naval programs, and land and air defense systems, including Patriot, Standard Missile and Tomahawk. Adjusted operating profit of $1.1 billion was up $275 million versus the prior year driven by improved productivity, higher volume and favorable mix, including Patriot programs.

Net productivity improved $104 million year-over-year and included approximately $85 million of benefits in the quarter associated with an international contract modification and a favorable adjustment related to an offset obligation. In the quarter, Raytheon expanded margins by 190 basis points year-over-year.

Bookings in the quarter were $52.3 billion, resulting in a book-to-bill of 6.54% and a backlog of $130 billion. On a rolling 12-month basis, Raytheon's book-to-bill is 2.9. In addition to the munitions contracts that Chris mentioned earlier, other key awards in the quarter included $3.1 billion to provide training systems for the British Army, $3 billion of classified awards and $1.8 billion for SPY 6 production.

Turning to Raytheon's full year outlook. We now expect sales to grow low teens on both an adjusted and organic basis. This is up from our prior range of high single digits to low double digits due to the strength Neil mentioned. And we now expect operating profit to grow between $800 million and $850 million versus 2025, and up from our prior expectation of between $575 million and $650 million, driven by the drop-through on increased sales volume, improved productivity and favorable program mix. With that, I'll hand it back over to Chris for some closing remarks.

Christopher Calio

Okay. Thanks, Nathan. We delivered another strong quarter of results and are confident in our updated full year outlook, reflecting the continued execution across the company. and I want to thank all of our employees for their dedication to our mission. RTX is exceptionally well positioned across commercial aerospace and defense with our leading franchises, growing installed base and record backlog. .

We remain focused on executing on our commitments, investing in the right technologies and capacity and leveraging our breadth and scale to drive top and bottom line growth this year and beyond. With that, let's open it up for questions.

Operator

[Operator Instructions] Our first question comes from the line of Sheila Kahyaoglu of Jefferies.

質疑応答

Sheila Kahyaoglu

Sure. Chris Neil and Nathan, quarter up 14% organically margins, 14% was a standout as well. Obviously, some onetimers in that margin number. As we think about where you are today and the continuous margin improvement, can you talk about specifically Raytheon and where we are on the missiles and munitions lamp as there are a number of additional UCS in hand now? And how do you think about the volume and margin opportunity as that begins to feather in, in '26 and thereafter? .

Christopher Calio

Yes. Thanks, Sheila. As you noted, we're pretty pleased with Raytheon's organic sales growth here in the quarter and even more so with the execution that underpinned it. Output across our critical munitions was up over 90% and -- and we're seeing output growth across other critical munitions programs as well. So very happy with the operational performance the team is showing to ramp given the needs that are out there in the market. .

With respect to the conversion of the framework agreements to the Yukos, again, a lot of hard work went into that, a lot of collaboration with the Department of War. That's all in, about $70 billion in combined value that provides Raytheon almost a decade of demand visibility, obviously critical, not only for us but for our supply chain as we seek to take these rates up anywhere from 2 to 4 -- and these are binding contracts. They've got robust terms, including price, delivery schedules and the like. And so now we've shifted into the execution phase, lining up the supply chain, putting up POs for tooling and test equipment, all the things we need to do to make that rate. And we've also been working really closely with the department on all the actions necessary to accelerate the production, streamlining test requirements, improving producibility where we can, addressing obsolescence, qualifying new suppliers. In 2025 alone, Raytheon added 150 new suppliers. We've got to get that supply base as strong as we possibly can.

And so right now, it's about just removing any and all bottlenecks so we can get to these higher rates. In terms of how this sort of feathers in, and we're going to execute these contracts over the next, say, 7 to 10 years. And as Neil noted upfront, we're going to account for these like other defense programs. Revenue will be on a cost-to-cost basis. And as we scale production and continue to drive the efficiencies given the volumes here and given the visibility we've given the supply chain -- we think these contracts have the potential to support margin expansion at Raytheon, above and beyond where they are today.

Operator

Our next question comes from the line of Peter Arment of Baird. .

Peter Arment

Chris Neil. Nice results. Good morning. Probably a question for both of you, but Chris, thinking about supporting all this growth tied to the framework deals and the aero ramp. But how are you thinking about like cash conversion. You had a strong raise for '26. Any puts and takes that we should be thinking about going forward from here just regarding either framework CapEx or advances? Any color here would be helpful. .

Christopher Calio

Yes, I'll start and certainly ask Neil to pile in as well, Peter. Again, if you just look at the fundamentals of this business, they're pretty strong, robust demand, large installed base -- so again, we think this supports our business being able to generate that 90% to 100% of free cash flow to adjusted net income. We've been pretty consistent in saying that.

And there will be investments associated with the UCaaS and the demand that we're seeing, but they incorporate a collaborative funding approach to help with some of the upfront free cash flow. So again, for us right now, it's all about focusing on meeting this demand. We've got a $340 billion backlog. We got to make sure that we've got the supply chain where it needs to be in the capacity, not only in our own shops, but again with some of these key suppliers. And so that's where the focus is going to be.

Neil Mitchill

Yes, Chris, maybe I'll add a couple of thoughts on some of the things that we've incurred in '26 and how they might play out as we start to turn the corner and look at '27, I'm not going to give a '27 outlook today for free cash flow. But as I sit back and think about the underpinning of the drivers, the first thing is we've obviously been tailing down on the powdered metal payments. So I expect that to be probably about a $500 million tailwind as we head into 2027. You heard us talk this morning about the EPA refunds. So we had about $300 million in cash coming in the third quarter. There's another $50 million that will come in, in the fourth quarter, and then that will be largely behind us.

So -- that will turn into a bit of a headwind. I'm thinking there's probably about $100 million of pension headwind as well. So all of that sort of nets to about 0. So you step back and you think about the underlying drivers of the business, Chris just talked about how the frameworks will play out, largely a cash-neutral event as we head into '27.

So then it comes down to segment operating profit growth, which we're expecting to see. We're going to have operational expansion of the margins. So excluding the benefit that we just talked about from IEEPA, we'll still grow our margins. and we're going to keep an eye on the need for probably a little bit higher working capital as we continue to support strong levels of organic sales growth. You saw we took our guidance up today, added 2 points of organic growth of this year. We've seen some working capital draw still seeing increased turns on inventory and working capital, but as we kind of position ourselves for the continued growth and delivering this $340 billion of backlog, I could see a little bit of a headwind there.

But all in all, we expect cash flow to be up next year, really well positioned, about 70% of the way to our 2026 goal so far and still some work to do here in the fourth quarter, but feel good about where we sit today. Thank you.

Operator

Our next question comes from the line of Rob Stallard of Vertical Research.

Robert Stallard

Thanks so much. Good morning. Chris, it's probably 1 for you. Obviously, the airlines are struggling with the higher cost of fuel at the moment. We've seen some of them pulling down their flight activity plans for the fourth quarter. I was wondering if you're seeing any change in behavior from your airline customers as a result of these challenges that are going through?

Christopher Calio

Yes. Thanks, Rob. You're right. We're closely engaging with the airlines and and doing bottoms-up sort of fleet planning and understanding kind of where their head is in 2027, the impact of the cost headwinds that you just mentioned, looking obviously at the consumer and the consumer health but what we've seen is what you saw in our numbers here in Q3, which has been resilient demand and a resilient consumer.

I mean we had 16% organic growth in commercial aftermarket in Q3, our GTF PW11 output was up significantly, 35% year-over-year, and that demand is going to continue into next year and grow. Content has continued to be strong on the V2500. And then as you heard Nathan say upfront, Collins had continued organic growth across all 3 channels with mods and upgrades and provisioning both up double digits.

And we're also seeing, again, retirements that have been relatively low and in line with our expectations. So as we sit here today, Rob, demand has continued to be resilient. We think it's durable. And again, we're going to watch all the other things that everyone else is watching is we're kind of head into '27 on jet fuel and the other cost headwinds.

But if you just step back for a minute and you just kind of let your mind linger past some of these near-term issues, I mean there are really strong fundamentals that underpin our aftermarket growth. I mean there's the auto warranty flight hours, there's pricing, there's a growing installed base. So we feel very good medium, long term about our commercial aftermarket positioning.

Operator

Our next question comes from the line of Kristine Liwag of Morgan Stanley.

Kristine Liwag

Maybe, Neil, you talked about with the Ammunition contract that you've received with that $770 billion in multiyear contracts, you're seeing production rates increasing 2x to 4x over time. But these are just from the contracts that have converted to firm orders but you've also got multiple framework agreements that have yet to convert to orders. When we think about the opportunity set that's ahead, including what you've already got, how should we think about the cadence of revenue and earnings contribution on an annual basis? Like when does this start to peak? Is this really more of an acceleration in '28 and beyond? Could we see some of this in '27? I know you don't want to give '27 guidance yet, but just help us understand how we should think about the revenue and growth?

Neil Mitchill

Sure. Thank you for the question, Kristine. So obviously, there are a few variables here, the most important of which is how the defense budgets play out in the coming months. But Nonetheless, we're very confident in the demand and need for these important munitions. So as you pointed out, we got 2 of the frameworks converted to on definitized contracts in the third quarter. We had 2 more that came here in the fourth quarter. So those will be included in our fourth quarter bookings. .

And we've booked a little bit of revenue on this here in '26, and we certainly do expect some of that to ramp up in '27 as we begin to facilitize. But I think importantly, before I even get further on that, we got this enormous backlog to deliver.

And so as I look at Raytheon's 2027 and beyond outlook, it shows very strong top line growth opportunity. in its base backlog and then you put this on top of it as well. And so I won't get into the specifics, as you pointed out today, but certainly, I see this as starting to ramp over the next 2 years in earnest and really continuing through 2030 when we get into full rate production for the suite of munitions that we'll be providing.

Operator

Our next question comes from the line of Myles Walton of Wolfe Research.

Myles Walton

Looking at the margin performance of Collins, excluding IEEPA, you're nicely ahead of 18%. The implied 4Q margins come back down to at or below where you were in the first half. I'm curious -- you talked about the cost savings initiatives having an impact. How sustainable are those? And maybe what should we be thinking of Miles?

Christopher Calio

We lost you there, Myles. But from what we did here your question we'll guess the question. We'll reframe the question as we like it. We heard the question on Collins -- there you go. There you go. Go ahead. We hear you now. .

Myles Walton

Great. So I was just looking at the margin performance at Collins. Excluding IPA, you're nicely above 18% in the quarter. It looks like 4Q margin implied you drop back to mid-'16. I'm just curious, was there anything special about the quarter which is interesting because you had very high OE rates. And then maybe make a comment of the opportunity for expansion into '27 that Neil, I think you alluded to expansion across the business.

Neil Mitchill

Yes. Well, obviously, we're really pleased with where Collin's operational margins were in the third quarter, and there really was nothing I would call out that was particularly unusual about the third quarter. So it's good to see the traction that they're getting. Everything we've been talking about for the last Five years, frankly, about higher OE production, getting good absorption. The aftermarket drop-through, the increased content on the installed base is coming to fruition, and we got good defense performance as well at really good margins. So the third quarter was strong and very clean. As we walk to the fourth quarter, you're right, we see a little bit of pullback on the margins.

And what I'll tell you there is there's a couple of things. First, obviously, we won't have the refunds repeat for Collins, that's all behind us here in the third quarter. We are investing in that business. It's really important for us to make sure that we're prepared for next-generation technology. And so we'll see a little bit higher research and development in the fourth quarter as we usually do, but it's ramping a bit. We're also increasing our digital spend there. That's a key element of the transformation that Collins is going through in terms of their reducing complexity, automating back-office functions, et cetera. So that comes into play here in the fourth quarter.

We do see a little bit higher OE volume in the fourth quarter, probably gives us about 40 basis points of margin headwind and a few other timing items. But fundamentally, -- the Collins margins remain really strong, and we expect operational margins to continue to expand into '27, and we'll talk more about that, obviously, in January.

Christopher Calio

Maybe just Miles, to hit on 1 part of your question on sort of the sustainability on the structural cost reduction. I would tell you, and Collins would tell you that we're in the relatively early stages of that, and we've continued to see some really good progress there. You heard Neil talk about some of those initiatives. It's consolidating operations, increasing costs at best cost locations, really attacking the overhead layers and you saw sort of the indirect head count reduction that we referenced in our remarks. So these actions are going to continue to compound over time and provide some nice tailwind to Collins' margins. .

Operator

Next question comes from the line of Ron Epstein of Bank of America. .

Ronald Epstein

Maybe just a quick follow on here to a couple of questions that were asked. On the UCaaS, if they're not definitized how you hope they will be right floorings change and all that sort of stuff, you guys protected. Can you talk about that a little bit?

Christopher Calio

Yes, absolutely, Ron. And I won't get into the detailed terms -- but what I will say is that we are protected if there are changes in the budgetary environment and changes in volumes, that was a critical part of our discussions. We want to move out quickly and get to these rates. The department understood that. But it was also cognizant of the fact that things could change in this budget environment and that we've got the protections we need to feel good about moving out on these investments.

I will say though, Ron, even with the sort of the budget risk that, that sort of sits out there, I do believe that our critical munitions will be prioritized. No matter how the machinations ultimately shake out between is there going to be a reconciliation, what's in the base? I think these UCaaS are a testament to how critical these munitions programs are and that they will continue to be prioritized as we go through the budget process. So again, feel confident that we'll see these go through but protected on the downside just in case.

Ronald Epstein

And then if I may, we were walking around the U.S.A., 1 thing came up pretty much in every meeting we did nobody can get printed circuit briefs and then people are having problems getting capacitors and resistors in this metric. So as you think about these ramps and just real fundamental components that are in short supply, some of it largely because of what's going on in the AI build-out. How are you guys thinking about that, right? Because you got this big second sound coming from a whole other side of industrials is absorbed in a lot of parts that you guys would normally use. .

Christopher Calio

Yes. Absolutely, Ron. You're hitting on the single biggest enabling factor in getting to these enhanced rates, the 2 to 4x that I mentioned before. It's absolutely going to take a change in how we do things with our supply chain. You heard me mention upfront, some of the things we're doing differently in collaboration with the department in terms of streamlining test requirements, things that sit generally speaking, within the department's purview, how do we be more efficient in how we do testing? How do we look at our requirements and really interrogate them to make sure that everything is absolutely necessary? And then how do we work with them to bring additional suppliers into the defense industrial base?

I mean you're right, there are certain pieces that we are competing with other industries. You mentioned the AI build-out. I mean, keep in mind, we're looking for a little bit different things than some of those folks, but working with the government to make sure that the folks that are producing the things that we need are prioritizing us, and we're not going to be left behind by virtue of AI build-out or other things. Output critical minerals in that same category.

These are things that are going to be important for both the commercial and defense. And we've been working those for a long time and departments helped there as well in terms of helping us secure long-term supply to make sure that we've got what we need for '27 and beyond. So I'll just tell you that the supply chain focus is acute and is where we're putting a lot of our energy focus and investment.

Operator

Our next question comes from the line of Seth Seifman of JPMorgan.

Seth Seifman

Thank morning, everyone. Chris, I wanted to ask, when you think about the NDAA this year and the rate to repair, provisions that are in there. And you guys have a big defense portfolio, not just in Raytheon, but also in Pratt and Collins. How do you think about the potential impact of that on the company?

Christopher Calio

Yes. Thanks, Seth. I won't speculate too much right now as I know that legislative process is ongoing. And as you noted, the '27 budget is final. Again, we want to be supportive of our customers and their sustainment needs. But we're also going to need the kinds of protections around IP and protections around the investments that we've made and to make sure that we can balance those needs and the life cycle ownership needs of the customer. So again, I think, ultimately, we'll get to the right place on this, and we'll see how it shakes out.

Operator

Our next question comes from the line of Scott Deuschle of Deutsche Bank.

Scott Deuschle

Neil, can you characterize for Pratt on when these free cash flow conversion is today relative to its after-tax earnings? And then how you expect that to trend over the next few years?.

Neil Mitchill

Scott, thank you. Listen, as I look at Pratt, first of all, it's generating substantial cash flow in '26. It has been every year since the trough of COVID. So it's a very productive and cash flow positive entity. Keep in mind, about half of it is commercial engines, 1/4 of it is military, 1/4 of it is Pratt Canada. What's great about as we look forward, as you all know, we've made substantial investments in expanding our MRO capacity, getting our facilities put together for assembly of GTF engines, we expect that to continue as we continue to increase our volumes.

But on the GTF aftermarket, we've been doing a number of overhauls that our paint shop visit those full interval shop visits are coming due here this year and into the next several years. And each of those shop visits brings with it cash payments.

So Pratt will be a tailwind to RTX' free cash flow over the next 3 years. I'm not going to put a number on it today, but you've heard the kind of growth rates we've demonstrated over the last 2 years in the MRO output. We expect strong call it, low double-digit increases in shop visits as we go into '27 and beyond.

And so with that, will come to cash flow that we've -- we expect to return the investment on the GTF.

Scott Deuschle

Can you say what percent of GTF shop visits or pay at overhaul? .

Neil Mitchill

So we talked about the contracting landscape before. And about 80% of the contracts for the GTF program are under a long-term contract. And I would say the vast majority of them are at a pay at shop visit contract. And so the good news is, as you've looked at the results of RTX and Pratt a key part of that over the last few years, we have generated substantial free cash flow. And we have, at the same time, made substantial investment in overhauls over the last few years. And so the contract asset has grown at Pratt, but over the next 3 to 5 years, we'll start to see that come down and generate tailwinds for the business. .

Operator

Our next question comes from the line of John Godyn of Citigroup.

John Godyn

I was hoping we could just stay on Pratt for a bit and maybe revisit margins. Obviously, modeling Pratt margins, there's a lot of moving parts. You had the APA. I'm just curious how you guys self-assess performance recently. And when we look out to a world where aftermarket trends stay strong, as you described, AOGs are declining. How should we think about the shape of a margin breakout eventually? Any additional color would be helpful.

Christopher Calio

I'll start, John, and then I'll ask Neil to chime in. Look, when you think about Pratt's margin expansion and performance, it does center around the GTF. You heard us talk earlier today about the MRO performance on the 1,100, up 37% year-over-year. Turnaround time has come down, and that's with heavier shop visits. So really strong performance from an MRO perspective, which will help drive AOGs down here in the fourth quarter. And then it's really shifting to the GTF advantage in HS plus.

Those are going to be the main thrust behind margin expansion in our large commercial engine business. GTSA is in production today. As you know, we talked about it EIS with United earlier, so we're very pleased about that. We're taking a disciplined approach to that production cut over. This configuration will get cut in over a period of several years to manage the risk.

There's a large proportion of the bill of material that's common, but there's some that's unique. We want to make sure those are up at the right rates as we cut that in. And then on HopSection plus which, as you know, is the effectively the derivative of the GTF advantage, you get 90% to 95% of the durability benefits in a kit. We're working with AOS and regulators to finalize certification and we anticipate it's going to be installed into MRO early next year. And we also expect that cut in to be more aggressive and faster than the 1 I just described on the GTF advantage.

So again, it's really going to come down to continuing on the MRO output on GTF and then the cutover on GTF advantage and then the cutover on HS and our GTF shop visits.

Neil Mitchill

Chris, the only thing I would add maybe to just put some numbers around what we're talking about here. We've talked about Brett being entitled to low to mid-teens margins over the longer term. And when I look at the performance of the business and the mix of installs and spare engines, the growing GTF aftermarket, the continued steady V2500 shop visit outlook that we have for the next several years, all of those things contribute to margin growth year-over-year through the next 5 years. It's going to be a gradual growth.

But importantly, as I just talked about a few minutes ago, it will come with significant cash flow tailwind as well. as we convert these shop visits to paying shop visit. So the formula for margin expansion is in place. We've got good traction on the aftermarket, on the pricing and I think that the team is focused on the right things at Pratt would need to drive that growth over the next several years.

Operator

Our next question comes from the line of Scott Mikus of Melius.

Scott Mikus

Chris, the company is generating a lot of free cash flow, and there's some sensitivity around stock buybacks for defense contractors. But earlier this year, we saw a Northrop filed habits consent decree related to Orbital APK acquisition either waived or modified. The administration allows that to go through. Would you look at acquiring a solid rocket motor supplier to help you with the ramp on missiles?

Christopher Calio

SYes. Thanks. Appreciate it, Scott. Again, I think when we look at our supply chain, we're looking at all of our possible constraints -- we see constraints, as I mentioned earlier, in castings, and we were investing in our own Asheville facility there. We see constraints in Rocket Motors as noted. I talked earlier about critical minerals. So we're always looking at whether or not we deploy capital to bring additional sources of supply in, in terms of qualifying new suppliers.

And we're also always looking at places to deploy capital to bring certain suppliers in-house if we feel like it's a major bottleneck. On Rocket Motors, in particular, I will tell you, we're expanding the supply base and entering into partnerships with other solid rocket motor suppliers because I think that's just an area that we're just you're never going to have enough suppliers there. I think the demand is going to be incredibly high and we need to continue to spread that risk across a number of suppliers, which is why you've seen some of our announcements that we've made in terms of our partnerships with other rock and motor suppliers.

So again, just stepping back, we're always looking at ways to shore up our supply chain. No immediate plans on rocket motors. Again, that's more of a partnership strategy, but always looking for ways to strengthen the base.

Operator

Our next question comes from the line of Matt Akers of BNP Paribas. [Operator Instructions]

We go to the next question, which comes from the line of Gautam Khanna of TD Colin.

Gautam Khanna

I was wondering if you could characterize Raytheon's foreign backlog given all the orders on the U.S. side this quarter? And then also if you could talk a little bit about do the missile framework agreements because they're for mature programs. Do the profit rates on those approximate that of the foreign backlog? Is it a -- should we view it as a substantial mix tailwind over time?

Christopher Calio

On the last part of your question, as I said earlier, as we continue to move into the production phase and we start to see the efficiencies come from the higher volumes, and from our supply base. Again, we think that these can support margin expansion at Raytheon. On the international side, again, it continues to be a very strong portion of the Raytheon backlog.

Our international bookings at Raytheon are up 2.5x year-to-date on a year-over-year basis. So that international demand continues to be very, very strong. And again, I know there's been some overhang regarding questions on the budget and the like. But our international customers continue to have really strong demand for our product, whether that be Europe, MENA, Asia Pac. So the demand internationally continues to be exceptionally robust.

Neil Mitchill

And just to put a finer point, sorry if I missed Chris, 37% of the total backlog is international. It's 52% if you exclude the munitions contracts, Tomahawk and MRAM that we added. So still very substantial. We booked $9 billion worth of international orders at Raytheon during the third quarter, a little overshadowed by the size of Tom off and MRAM, but still really, really strong bookings, and we expect some more here in the fourth quarter. So just a little extra color there. .

Operator

Thank you. The last question comes from the line of Ken Herbert of RBC Capital Markets.

Kenneth Herbert

As you look at the strong aftermarket growth in Pratt, you've obviously talked a lot about the GTF strength, how much of that growth was GTF? Or can you give us any more update on what you're seeing on PW4, V25 and maybe Pratt Canada aftermarket in the quarter?.

Neil Mitchill

Thanks, Ken. Listen, the majority of that growth came from the GTF aftermarket. We're still seeing really solid content on the V2500. So Q3 was lifted a little bit by particularly strong content on the V program. So a little bit of growth there as well. We see that actually slowing down in the fourth quarter just on the mix of the inductions and the engines going through the shop.

But as I said in the last call, we expected about 800 shop visits for 2026. We are right on track to that rate through the end of the third quarter, and we see no change to that outlook in the fourth quarter. And frankly, I think we see that number of shop visit inductions pretty flat and consistent year-over-year with, again, increasing content on the V.

But as we look at where we are today and the top line growth at Pratt, a lot of that's being driven off of our GTF program, which, over time, will far outweigh the structured decline in the V2500 powered aircraft.

Operator

With that, I will now turn the call back over to Nathan Ware.

Nathan Ware

All right. Thank you, Latif. That concludes today's call. As always, the Investor Relations team will be available for follow-up questions. Thank you all for joining us, and have a good day.

Christopher Calio

Take care, everybody.

Operator

This now concludes today's conference. You may now disconnect.