RTX 2026年第三季度业绩电话会：上调业绩展望，积压订单达3400亿美元

核心要点

• RTX公布2026财年第三季度调整后销售额为250.0亿美元，同比增长11%，按有机口径计算增长12%。商用原始设备（OE）、商用售后市场和防务业务均实现两位数的有机增长。
• 调整后每股收益（EPS）增长33%至2.26美元，其中包括来自《国际紧急经济权力法案》（IEEPA）成本回收的0.25美元收益。自由现金流为21.0亿美元。
• 在手订单创历史新高，达到3400亿美元，同比增长36%，环比增长18%。防务类签约总额近590亿美元，而商用订单超过220亿美元。
• 管理层将全年调整后销售额预期上调至970.0亿至975.0亿美元，调整后每股收益预期上调至7.65至7.75美元，自由现金流预期上调至90.0亿至92.0亿美元。
• 雷神公司（Raytheon）获得523亿美元的新增订单，季末在手订单达到1300亿美元。多年期弹药合同预计将在未来几年持续支持营收增长，并随着产能扩大提升利润率。
• 普惠公司（Pratt & Whitney）PW1100的MRO（维护、维修和大修）产出同比增长超过35%。管理层继续预计第四季度停飞飞机（AOG）数量将减少，并计划于明年年初在MRO维护中引入GTF热端升级包（hot section plus）。

核心财务数据

指标

2026财年第三季度

变动 / 详情

调整后销售额

250.0亿美元

同比增长11%；有机增长12%

调整后部门营业利润

39.0亿美元

增长39%

调整后部门利润率

15.6%

提升310个基点，其中包括来自IEEPA回收的约160个基点

调整后每股收益

2.26美元

增长33%；包含来自IEEPA回收的0.25美元

GAAP准则下持续经营每股收益

1.89美元

包含收购会计处理及重组相关调整

自由现金流

21.0亿美元

包含约3.00亿美元的IEEPA回收款以及1.65亿美元的粉末冶金补偿款

总在手订单

3400亿美元

同比增长36%，环比增长18%

商用订单

超过220亿美元

同比增长超60%

防务签约额

近590亿美元

防务出货订单比（Book-to-bill）为4.57

业务与运营表现

柯林斯航空（Collins Aerospace）

柯林斯航空季度销售额为84.0亿美元，按调整后口径计算增长10%，按有机口径计算增长12%。剔除资产剥离因素，受窄体机和宽体机出货量增加的推动，商用OE销售额增长了23%。

商用售后市场销售额增长9%，其中改装与升级增长18%，备件铺货（provisioning）增长12%，零部件与维修增长7%。防务销售额增长7%。

调整后营业利润增加5.94亿美元，达到18.0亿美元。利润率扩大560个基点，其中包括来自IEEPA回收的300个基点收益。管理层表示，包括设施整合、增加低成本地区的生产以及精简管理层级在内的结构性举措仍处于相对早期阶段。

普惠（Pratt & Whitney）

普惠销售额增长10%至92.0亿美元。商用售后市场营收增长21%，主要归因于GTF的MRO业务量增加；而商用OE销售额因大发动机产品组合原因下降了5%。军用发动机销售额增长2%。

调整后营业利润增加2.17亿美元，达到9.68亿美元。10.5%的利润率中包含来自IEEPA回收的170个基点收益。

第三季度PW1100的MRO产出同比增长超过35%，今年累计增长超过30%。停飞飞机（AOG）数量环比保持相对稳定，管理层预计第四季度将有所减少。首架由GTF Advantage发动机提供动力的飞机已在美联航（United Airlines）投入运营，而热端升级包预计将于明年年初开始进入MRO维护阶段。

今年至今，RTX已获得超过800台GTF订单和意向承诺，使其发动机在手订单总量超过8,000台。

雷神（Raytheon）

在海军项目以及包括“爱国者”（Patriot）、“标准”导弹（Standard Missile）和“战斧”巡航导弹（Tomahawk）在内的防空与陆基防御系统带动下，雷神销售额增长14%至80.0亿美元。受生产效率提升、业务量增长及有利的项目组合支撑，调整后营业利润增加2.75亿美元至11.0亿美元。

新预订订单总额为523亿美元，出货订单比（book-to-bill）为6.54，在手订单达1300亿美元。关键弹药产出同比增长超过90%。

RTX表示，已转换的弹药框架协议总价值约为700亿美元，提供了近十年的需求可见度。预计生产速率将提升2至4倍，营收将随着成本计入项目而予以确认。

国际需求同样保持强劲。今年至今，雷神的国际订单同比增长2.5倍。国际项目占总在手订单的37%，若扣除新增加的“战斧”（Tomahawk）和MRAM合同，则占52%。

管理层业绩指引

2026财年全年指标

更新后展望

此前展望

调整后销售额

970.0亿-975.0亿美元

950.0亿-960.0亿美元

有机销售额增长

10%-11%

8%-9%

调整后每股收益

7.65-7.75美元

7.10-7.25美元

自由现金流

90.0亿-92.0亿美元

85.0亿-87.5亿美元

管理层目前预计商用OE销售额将实现高单位数增长，商用售后市场销售额将实现两位数低段至10%出头（low teens）的增长，防务销售额将实现两位数低段的增长。

分业务来看，RTX预计柯林斯调整后销售额将实现高单位数增长，营业利润较2025财年增加9.25亿至9.75亿美元；普惠销售额预计将实现高单位数增长，营业利润增加4.75亿至5.25亿美元；雷神销售额预计将实现10%出头（low teens）的增长，营业利润增加8.00亿至8.50亿美元。

展望2026财年之后，管理层预计2027财年营收和盈利将继续增长，运营利润率将有所提升，自由现金流也将更高。详细的2027财年指引计划在明年1月的第四季度财报电话会议上公布。

风险与关注领域

• RTX正在扩大产能以满足其3400亿美元的在手订单，随着有机销售额的增长，这可能会带来潜在营运资金需求。
• 供应链的可获得性仍然是计划提升弹药产量的核心。管理层特别提到了印制电路板（PCB）、电容器、电阻器、铸件、火箭发动机和关键矿产。
• 美国政府此前一直在持续决议案（continuing resolution）下运行，未来国防预算的时间节点和构成仍存在不确定性。RTX表示，其弹药合同包含针对预算或生产规模变动的保护条款。
• 航空公司燃油成本上升以及航班活动可能减少可能会影响商用售后市场需求，不过管理层将当前需求描述为富有韧性。
• IEEPA成本回收为第三季度的收益、利润率和现金流带来了实质性收益。管理层预计第四季度仅有约5000万美元的额外现金回收，届时该收益将基本结束。
• 粉末冶金补偿款支付正在减少，但GTF机队管理、MRO产能以及停飞飞机（AOG）数量仍然是重要的运营变量。

分析师问答环节要点

弹药业务营收与利润率：管理层预计新合同将在未来两年内逐步爬坡，并持续增长至2030年，届时合同涉及的弹药产品组合预计将实现全速生产。出货量增加及供应链可见度提高有望支持雷神的利润率扩大。

现金转化率：RTX继续以自由现金流达到调整后净利润的90%-100%为目标。管理层预计，到2027年，由于粉末冶金支付款减少将带来约5.00亿美元的顺风，但这将被IEEPA退款的结束、预计1亿美元的养老金逆风以及潜在的营运资金投资所抵消。

柯林斯利润率：管理层表示，除了已披露的IEEPA回收外，第三季度的运营表现非常干净，没有任何异常的运营收益。预计第四季度的利润率将反映更高的研发投入、数字化投资和商用OE出货量，但运营利润率的扩大预计将持续至2027年。

普惠盈利能力与现金流：管理层重申，长期来看，普惠的利润率定位在10%至15%区间的中低段（low- to mid-teens）。GTF售后市场的增长、定价以及按进厂维护付费（pay-at-shop-visit）合同预计将支持利润率的逐步改善，并在未来三年成为自由现金流的顺风因素。

GTF合同结构：约80%的GTF合同为长期协议，管理层表示绝大多数均采用按进厂维护付费的条款。随着更多完整周期进厂维护产生现金支付，普惠的合同资产预计将在未来三至五年内下降。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

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.

分析师问答

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.

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