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Raytheon Technologies (RTX) Reports FY22 Results, Plans to Realign into Three Business Segments

January 24, 2023 6:45 AM EST

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Raytheon Technologies Corporation (NYSE: RTX) reported fourth quarter 2022 results and announced its 2023 outlook and plan to realign its business units into three segments.

Fourth quarter 2022

  • Sales of $18.1 billion
  • GAAP EPS from continuing operations of $0.96, which included $0.31 of acquisition accounting adjustments and net significant and/or non-recurring charges
  • Adjusted EPS of $1.27
  • Operating cash flow from continuing operations of $4.6 billion; Free cash flow of $3.8 billion
  • Achieved approximately $130 million of incremental RTX gross cost synergies
  • Company backlog of $175 billion; including defense backlog of $69 billion
  • Repurchased $408 million of RTX shares

Full year 2022

  • Sales of $67.1 billion
  • GAAP EPS of $3.51
  • Adjusted EPS of $4.78
  • Operating cash flow from continuing operations of $7.2 billion; Free cash flow of $4.9 billion
  • Achieved approximately $405 million of incremental RTX gross cost synergies
  • Repurchased $2.8 billion of RTX shares

Outlook for full year 2023

  • Sales of $72.0 - $73.0 billion
  • Adjusted EPS of $4.90 - $5.05
  • Free cash flow of approximately $4.8 billion
  • Share repurchase of $3.0 billion of RTX shares

"Raytheon Technologies delivered solid full-year results with strong free cash flow that exceeded our expectations," said Raytheon Technologies Chairman and CEO Greg Hayes. "We effectively supported the rapid commercial aerospace recovery and delivered critical platforms and advanced technologies for customers to meet their increasingly complex needs, while achieving $86 billion in new awards in 2022 and ending the year with a total backlog of $175 billion."

"Our portfolio is well positioned to capture growing demand and we expect to deliver sales growth and margin expansion, along with strong free cash flow generation, in 2023. We are deploying capital investments to bring new technologies to market and accelerate productivity improvement, all while remaining committed to returning at least $20 billion to our shareowners post-merger through early 2024."

Adjusted net sales, organic sales, adjusted operating profit (loss), adjusted net income, adjusted earnings per share ("EPS") and free cash flow are non-GAAP financial measures. When we provide our expectation for adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures (expected diluted EPS from continuing operations and expected cash flow from operations) is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure (such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures and other structural changes). We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See "Use and Definitions of Non-GAAP Financial Measures" below for information regarding non-GAAP financial measures.

Portfolio RealignmentOn track to surpass all merger-related goals, the company plans to strengthen its market position and generate additional revenue and technology synergies by realigning its business units. Christopher Calio, whose role has been expanded to President and Chief Operating Officer of Raytheon Technologies, effective March 1, will oversee the business transformation initiative.

"In 2023 we will further align our market-leading franchises with customer needs to drive operational agility and excellence," said Christopher Calio, Chief Operating Officer, Raytheon Technologies. "By more fully leveraging our scale, we will deliver enhanced customer solutions and unlock cost savings opportunities with improved resource allocation and a streamlined footprint."

The three focused business segments will be Collins Aerospace, Pratt & Whitney, and Raytheon. The company plans to implement the reorganization during the second half of 2023 and will provide additional updates on its progress over the coming months.

Additionally, the company announced that Roy Azevedo, President of Raytheon Intelligence & Space (RIS), will retire from his role and serve as an advisor to Christopher Calio, Chief Operating Officer, to help with the transformation.

Fourth quarter 2022Raytheon Technologies reported fourth quarter sales of $18.1 billion, up 6 percent over the prior year. GAAP EPS from continuing operations of $0.96 was up 109 percent versus the prior year and included $0.31 of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted EPS of $1.27 was up 18 percent versus the prior year. Both GAAP and Adjusted EPS included about 6 cents of a tax benefit associated with legal entity and operational reorganizations.

The company recorded net income from continuing operations attributable to common shareowners in the fourth quarter of $1.4 billion, up 108 percent versus the prior year which included $446 million of acquisition accounting adjustments and net significant and/or non-recurring charges. Adjusted net income was $1.9 billion, up 16 percent versus prior year. Operating cash flow from continuing operations in the fourth quarter was $4.6 billion. Capital expenditures were $855 million, resulting in free cash flow of $3.8 billion.

Summary Financial Results – Continuing Operations Attributable to Common Shareowners

4th Quarter

Twelve Months

($ in millions, except EPS)

2022

2021

% Change

2022

2021

% Change

Reported

Sales

$ 18,093

$ 17,044

6 %

$ 67,074

$ 64,388

4 %

Net Income

$ 1,422

$ 685

108 %

$ 5,216

$ 3,897

34 %

EPS

$ 0.96

$ 0.46

109 %

$ 3.51

$ 2.58

36 %

Adjusted

Sales

$ 18,093

$ 17,044

6 %

$ 67,074

$ 64,388

4 %

Net Income

$ 1,868

$ 1,614

16 %

$ 7,098

$ 6,445

10 %

EPS

$ 1.27

$ 1.08

18 %

$ 4.78

$ 4.27

12 %

Operating Cash Flow from Continuing Operations

$ 4,628

$ 3,161

46 %

$ 7,168

$ 7,142

— %

Free Cash Flow

$ 3,773

$ 2,207

71 %

$ 4,880

$ 5,008

(3) %

Backlog and BookingsBacklog at the end of the fourth quarter was $175 billion, of which $106 billion was from commercial aerospace and $69 billion was from defense.

Notable defense bookings during the quarter included:

  • $1.0 billion to manufacture and deliver Guidance Enhanced Missile (GEM-T) for an international customer at Raytheon Missiles & Defense (RMD)
  • $1.0 billion of classified bookings at Raytheon Intelligence & Space (RIS)
  • $698 million for National Advanced Surface-to-Air Missile System (NASAMS) for Ukraine at RMD
  • $638 million for F135 production at Pratt & Whitney
  • $512 million for F135 sustainment at Pratt & Whitney
  • $415 million for Evolved Seasparrow Missile (ESSM) production for the U.S. Navy and international customers at RMD
  • $405 million for maintenance and support of a Surveillance Radar Program (SRP) for an international customer at RMD
  • $317 million for AIM-9X Sidewinder production lot 23 for the U.S. Air Force and international customers at RMD
  • $247 million for MIR replenishment for an international customer at RMD
  • $210 million for F117 sustainment at Pratt & Whitney

Segment ResultsThe company's reportable segments are Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space (RIS) and Raytheon Missiles & Defense (RMD).

Collins Aerospace

4th Quarter

Twelve Months

($ in millions)

2022

2021

% Change

2022

2021

% Change

Reported

Sales

$ 5,662

$ 4,942

15 %

$ 20,597

$ 18,449

12 %

Operating Profit

$ 741

$ 461

61 %

$ 2,343

$ 1,759

33 %

ROS

13.1 %

9.3 %

380

bps

11.4 %

9.5 %

190

bps

Adjusted

Sales

$ 5,662

$ 4,942

15 %

$ 20,597

$ 18,449

12 %

Operating Profit

$ 743

$ 469

58 %

$ 2,574

$ 1,799

43 %

ROS

13.1 %

9.5 %

360

bps

12.5 %

9.8 %

270

bps

Collins Aerospace had fourth quarter 2022 sales of $5,662 million, up 15 percent versus the prior year. The increase in sales was driven by a 21 percent increase in commercial aftermarket, a 20 percent increase in commercial OE and a 5 percent increase in military. The increase in commercial sales was driven primarily by the recovery of commercial air traffic, which resulted in higher flight hours, aircraft fleet utilization, and narrowbody deliveries.

Collins Aerospace recorded operating profit of $741 million, up 61 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket volume and lower R&D expense, which more than offset higher SG&A expense. Adjusted operating profit of $743 million in the quarter was up 58 percent versus the prior year.

Pratt & Whitney

4th Quarter

Twelve Months

($ in millions)

2022

2021

% Change

2022

2021

% Change

Reported

Sales

$ 5,652

$ 5,115

10 %

$ 20,530

$ 18,150

13 %

Operating Profit

$ 306

$ 135

127 %

$ 1,075

$ 454

137 %

ROS

5.4 %

2.6 %

280

bps

5.2 %

2.5 %

270

bps

Adjusted

Sales

$ 5,652

$ 5,115

10 %

$ 20,530

$ 18,150

13 %

Operating Profit

$ 321

$ 162

98 %

$ 1,250

$ 487

157 %

ROS

5.7 %

3.2 %

250

bps

6.1 %

2.7 %

340

bps

Pratt & Whitney had fourth quarter sales of $5,652 million, up 10 percent versus the prior year. The increase in sales was driven by a 37 percent increase in commercial OE and an 11 percent increase in commercial aftermarket which more than offset a 2 percent decrease in military sales. The increase in commercial sales was primarily due to favorable OE engine volume and mix, and higher shop visits and related spare part sales. The decrease in military sales was driven primarily by lower military legacy aftermarket sales.

Pratt & Whitney recorded operating profit of $306 million, up 127 percent versus the prior year. The increase in operating profit was primarily driven by drop through on higher commercial aftermarket sales, which included a favorable customer contract adjustment, and was partially offset by higher SG&A and R&D expense. Pratt & Whitney recorded adjusted operating profit of $321 million in the quarter, up 98 percent versus the prior year.

Raytheon Intelligence & Space

4th Quarter

Twelve Months

($ in millions)

2022

2021

% Change

2022

2021

% Change

Reported

Sales

$ 3,544

$ 3,870

(8) %

$ 14,312

$ 15,180

(6) %

Operating Profit

$ 278

$ 639

(56) %

$ 1,342

$ 1,833

(27) %

ROS

7.8 %

16.5 %

(870)

bps

9.4 %

12.1 %

(270)

bps

Adjusted

Sales

$ 3,544

$ 3,870

(8) %

$ 14,312

$ 15,180

(6) %

Operating Profit

$ 278

$ 400

(31) %

$ 1,342

$ 1,594

(16) %

ROS

7.8 %

10.3 %

(250)

bps

9.4 %

10.5 %

(110)

bps

RIS had fourth quarter 2022 sales of $3,544 million, down 8 percent versus the prior year. The decrease in sales was driven by the impact of the prior year Global Training and Services divestiture. Excluding the impact of acquisitions and divestitures and FX, sales were down 5 percent versus prior year driven by Command, Control and Communications, Cyber, Training and Services, and Sensing and Effects.

RIS recorded operating profit of $278 million, down 56 percent versus the prior year. The decrease in operating profit was driven in part by the impact of the prior year Global Training and Services divestiture and the related gain on sale, as well as unfavorable mix, lower net program efficiencies and lower volume. On an adjusted basis, operating profit was down 31 percent versus the prior year.

Raytheon Missiles & Defense

4th Quarter

Twelve Months

($ in millions)

2022

2021

% Change

2022

2021

% Change

Reported

Sales

$ 4,100

$ 3,859

6 %

$ 14,863

$ 15,539

(4) %

Operating Profit

$ 376

$ 486

(23) %

$ 1,519

$ 2,004

(24) %

ROS

9.2 %

12.6 %

(340)

bps

10.2 %

12.9 %

(270)

bps

Adjusted

Sales

$ 4,100

$ 3,859

6 %

$ 14,863

$ 15,539

(4) %

Operating Profit

$ 418

$ 486

(14) %

$ 1,569

$ 2,004

(22) %

ROS

10.2 %

12.6 %

(240)

bps

10.6 %

12.9 %

(230)

bps

RMD had fourth quarter 2022 sales of $4,100 million, up 6 percent versus prior year. The increase in sales was primarily driven by higher net sales in Naval Power including SPY-6, Strategic Missile Defense including NGI, and Advanced Technology programs.

RMD recorded operating profit of $376 million, down 23 percent versus the prior year. The decrease in operating profit was driven primarily by unfavorable program mix and lower net program efficiencies, and a charge associated with a divestiture, partially offset by higher volume. RMD recorded adjusted operating profit of $418 million, down 14 percent versus the prior year.



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