RTX Corporation (RTX) — Q3 2026 Earnings Preview
Key Factors to Watch This Quarter
| Factor | Details | Context / Why It Matters |
|---|---|---|
| Revenue Growth | Consensus: $24,027M (+11% YoY) | Management raised FY26 guidance twice YTD; Q2 organic sales +16%. Q3 faces a tough comp (+13% in Q3 2025). |
| Adjusted EPS | Consensus: $1.50 | Guidance raised to $7.10–$7.25 for FY26 after strong H1; Q2 EPS +21% YoY. |
| Segment Performance | Raytheon: Defense demand, margin expansion; Collins: OE ramp, cost actions; Pratt: Aftermarket, MRO output | All segments delivered double-digit growth in Q2; Raytheon margins at 12.6%, Collins margin expansion, Pratt aftermarket up 25%. |
| Free Cash Flow | Consensus: $1,980M | FY26 guide raised to $8.50–$8.75B; Q2 FCF $2.9B, strong H1 cash conversion. |
| Backlog & Bookings | Q2 backlog: $289B (+22% YoY); Raytheon Q2 book-to-bill 2.42 | Robust demand, especially in defense (Raytheon), and commercial OE/aftermarket. |
| GTF MRO Output & AOGs | MRO output up 40%+ YTD; AOGs down 25% YTD | Execution on fleet management plan is critical for Pratt’s profitability and customer relations. |
| International Defense | Raytheon international backlog now 48%; $10B+ international awards H1 | International demand is a key driver for Raytheon’s growth and margin mix. |
| Cost Actions & Margins | Collins targeting 19–20% medium-term margins; Raytheon margin expansion | Margin expansion is a core part of the investment case; watch for progress on cost reduction and absorption. |
Summary and Conclusions
- RTX enters Q3 2026 with strong momentum: H1 2026 saw double-digit organic sales and EPS growth, robust free cash flow, and record backlog. Management has raised full-year guidance twice, reflecting confidence in both commercial and defense end markets.
- Q3 faces a tough comparable: Q3 2025 was a strong quarter (+13% organic sales growth), so YoY growth rates may moderate, especially as management flagged some normalization in H2 growth rates versus H1.
- Defense remains a standout: Raytheon’s Q2 bookings were exceptional, with international demand accelerating. Margin expansion continues, with management reiterating potential for further improvement as framework agreements convert to backlog.
- Commercial OE and Aftermarket solid: Collins is benefiting from the OE ramp at Boeing and Airbus, while Pratt’s aftermarket (especially GTF MRO) is driving profit growth. Watch for any signs of moderation in aftermarket demand or supply chain constraints.
- Execution on cost and productivity: Collins’ structural cost actions and Raytheon’s productivity gains are key to margin expansion. Management continues to target 19–20% margins at Collins medium term.
- Free cash flow conversion strong: H1 FCF was $4.2B, and management raised FY26 FCF guidance. Powder metal compensation headwinds are abating, supporting higher conversion going forward.
- Risks: Supply chain constraints (especially castings, rocket motors), macroeconomic volatility (air travel, fuel prices), and timing of defense contract conversions remain watch items.
Quarterly Financial Snapshot — Actuals vs. Consensus
Quarterly Results and Consensus (Quarterly Scope)
| Quarter | Revenue ($M) | YoY Growth | EBITDA ($M) | Net Income ($M) | EPS (GAAP) | FCF/Share ($) | Notes |
|---|---|---|---|---|---|---|---|
| Q2 2026 | 24,708 | +14% | 3,772 | 2,272 | 1.35 | 1.72 | Actuals (restated) |
| Q1 2026 | 21,472 | +6% | 3,478 | 2,076 | 1.22 | Actuals (restated) | |
| Q4 2025 | 22,704 | +12% | 3,592 | 1,993 | 1.15 | 2.62 | Actuals (restated) |
| Q3 2025 | 21,323 | +6% | 3,266 | 1,921 | 1.13 | 1.99 | Actuals (restated) |
| Q3 2026E | 24,027 | +11% | 3,967 | 2,422 | 1.50 | 1.98 | Consensus |
| Q4 2026E | 25,499 | +10% | 4,148 | 2,516 | 1.50 | 2.68 | Consensus |
*Consensus figures are not actuals.
Full-Year Financial Snapshot — Actuals vs. Consensus
| Fiscal Year | Revenue ($M) | YoY Growth | EBITDA ($M) | Net Income ($M) | EPS (GAAP) | FCF/Share ($) | Notes |
|---|---|---|---|---|---|---|---|
| 2025 | 86,996 | +9% | 14,553 | 8,394 | 4.91 | 7.76 | Actuals (restated) |
| 2026E | 96,168 | +11% | 16,210 | 9,888 | 6.03 | 8.93 | Consensus |
Segment Performance — Q2 2026
| Segment | Sales ($M) | YoY Growth | Adj. Op. Profit ($M) | Adj. Margin | Key Drivers |
|---|---|---|---|---|---|
| Collins | 8,210 | +8% | 1,370 | 16.7% | OE ramp, cost actions, margin expansion |
| Pratt & Whitney | 8,889 | +16% | 740 | 8.3% | Aftermarket +25%, military +23%, OE -8% (mix) |
| Raytheon | 8,269 | +18% | 1,043 | 12.6% | Defense demand, international mix, productivity |
Guidance Summary — FY 2026 (as of Q2 2026)
| Metric | Guidance (Q2 2026) | Prior Guidance (Q1 2026) | Change | Context Notes |
|---|---|---|---|---|
| Adjusted Sales | $95.0B–$96.0B | $92.5B–$93.5B | +$2.5B | Driven by defense (Raytheon), Pratt aftermarket, Collins OE |
| Organic Sales Growth | 8–9% | 5–6% | +3 pts | Strong H1, tougher H2 comps |
| Adjusted EPS | $7.10–$7.25 | $6.70–$6.90 | +$0.40/$0.35 | Segment profit, defense mix, productivity |
| Free Cash Flow | $8.50B–$8.75B | $8.25B–$8.75B | +$250M (low end) | Higher segment profit, working capital build for growth |
How Did They Report Last Year? (Q3 2025)
| Metric | Q3 2025 Actual | YoY Growth | Notes |
|---|---|---|---|
| Revenue ($M) | 21,323 | +6% | Restated actuals |
| Adj. EPS | 1.70 | +17% | Strong aftermarket, defense, OE |
| FCF ($M) | 4,025 | +104% | Working capital improvement, advance payments |
| Segment Margin | 12.1% | +70 bps | All segments contributed |
Q3 2025 was a strong quarter, with double-digit organic growth and margin expansion across all segments.
Are They Coming Off a Tough Comparable?
Yes. Q3 2025 saw:
- Organic sales growth of +13%
- Adjusted EPS up +17%
- Free cash flow more than doubled YoY
Management has flagged that H2 2026 growth rates will moderate versus H1 due to these tough comps, especially at Pratt (due to work stoppage catch-up in H2 2025) and Raytheon (material receipts normalizing).
Intra-Quarter and Conference Commentary
- Backlog strength: Q2 backlog $289B (+22% YoY), Raytheon book-to-bill 2.42, international backlog 48%.
- Defense: Raytheon bookings nearly $20B in Q2, including large international orders; framework agreements not yet in backlog.
- Commercial OE: Collins OE up 26% in Q2, benefiting from Boeing/Airbus ramp; capacity and supply chain investments ongoing.
- Aftermarket: Pratt aftermarket up 25% in Q2; GTF MRO output up 43%, V2500 shop visits on track, content strong.
- Margins: Collins margin 16.7% in Q2, Raytheon 12.6%, Pratt 8.3%; Collins targeting 19–20% medium term.
- Cash flow: Q2 FCF $2.9B; H1 FCF $4.2B; FY26 guide raised.
- Cost actions: Collins executing on structural cost reductions; Raytheon productivity gains continue.
- Risks: Supply chain (castings, rocket motors), macro volatility, defense contract timing.
Summary Table — Most Important Factors for Q3 2026
| Factor | What to Watch | Q3 2025 Actual | Q3 2026E Consensus | Guidance/Trend |
|---|---|---|---|---|
| Revenue ($M) | Growth vs. tough comp, defense/aftermarket mix | 21,323 | 24,027 | +11% YoY consensus; guidance raised |
| Adj. EPS | Margin expansion, cost actions | 1.70 | 1.50 | Guidance raised to $7.10–$7.25 FY26 |
| FCF ($M) | Conversion, working capital | 4,025 | 1,980 | FY26 guide $8.50–$8.75B |
| Raytheon Margins | Productivity, international mix | 12.2% | Q2 2026: 12.6%, trending higher | |
| Collins Margins | Absorption, cost reduction, OE mix | 15.7% | Q2 2026: 16.7%, targeting 19–20% medium term | |
| Pratt Aftermarket | GTF MRO output, V2500 shop visits | Strong | Q2 2026: +25% aftermarket | |
| Backlog ($B) | Orders, book-to-bill, international mix | 251 | Q2 2026: 289, +22% YoY |
Conclusion
RTX is coming off a very strong H1 2026 and a tough Q3 2025 comp. The most important factors for Q3 2026 are:
- Sustaining double-digit revenue and EPS growth against a high base
- Continued margin expansion at Raytheon and Collins
- Execution on GTF MRO output and aftermarket growth at Pratt
- Robust free cash flow conversion and working capital management
- Progress on defense framework agreements and international orders
- Ongoing cost reduction and productivity initiatives
Management has raised guidance twice this year, reflecting confidence in demand and execution. However, investors should watch for any signs of moderation in growth rates, supply chain constraints, or changes in end-market demand, especially given the tough YoY comparables.
