More earnings analysis: https://betafinch.com Groups: INDUSTRIALS (https://betafinch.com/groups/INDUSTRIALS) ────────── ALEX: Welcome to Beta Finch, your AI-powered earnings breakdown! Today we're diving into RTX's second quarter 2026 results, and this one's got a lot of moving pieces — defense budgets, GTF engines, international demand, the works. Before we get into it though, quick disclaimer: this podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions. JORDAN: And Alex, this was a genuinely strong print. Adjusted sales of $24.7 billion, up 16% organically. Adjusted EPS of $1.89, up 21% year-over-year. Free cash flow of $2.9 billion. Pretty much across the board, beat and raise. ALEX: Right, and the backlog number really jumped out at me — $289 billion, a record, up 22% year-over-year. Raytheon alone booked nearly $20 billion in awards this quarter, giving them a book-to-bill ratio of 2.4. That's just a massive amount of future work stacking up. JORDAN: What's interesting is where that demand is coming from. Over $5 billion of it was GEM-T Patriot effectors, largely international, plus the first domestic GEM-T production order in 30 years. And get this — 48% of Raytheon's backlog is now international, up four points year-over-year. Europe alone contributed over $7 billion in the first half. ALEX: That NATO spending story is really showing up in the numbers. And CEO Chris Calio flagged something big on the domestic side too — the 2027 base budget request is around $1.1 trillion, roughly a 25% increase year-over-year, with real money earmarked for RTX priority programs like Tomahawk and LTAMDS. JORDAN: Let's talk guidance, because they raised it meaningfully. Full-year adjusted sales now expected between $95 and $96 billion, up from $92.5 to $93.5 billion previously. EPS guidance moved up to $7.10-$7.25, from $6.70-$6.90. And free cash flow guidance ticked up to $8.5-$8.75 billion. ALEX: Breaking that down by segment — Collins Aerospace sales were up 13% organically, driven by strength across commercial OE, aftermarket, and defense. Pratt & Whitney was up 17% organically, helped by a huge 25% jump in commercial aftermarket. And Raytheon posted 18% organic growth with margins expanding a full 100 basis points to 12.6%. JORDAN: That Pratt aftermarket story is worth unpacking a bit. Remember, last year's Q2 had a four-week work stoppage, so there's some catch-up dynamic at play. But the underlying trend is real — GTF engine AOGs, meaning aircraft grounded waiting on engines, are down 25% year-to-date. MRO output was up over 40%, turnaround times down 23%. They're clearly getting that fleet management situation under control. ALEX: And on the innovation side, a few milestones stood out to me. Pratt got certification for the GTF Advantage engine and started deliveries to Airbus — that's supposed to double time-on-wing performance. Collins got selected to deliver mission autonomy software for the Air Force's Collaborative Combat Aircraft program, which feels like a meaningful foothold in next-gen fighter development. JORDAN: The Q&A had some good color too. One analyst pushed on those defense "framework agreements" — basically pre-negotiated deals that haven't converted into firm, backlog-counted contracts yet. Calio was pretty candid that those conversations are ongoing and productive, but the real unlock is getting multi-year funding commitments so suppliers will actually invest in ramping capacity. ALEX: There was also a great exchange about Collins margins. CFO Neil Mitchill talked about a "big step up" expected in the second half — about 60% from volume drop-through, 40% from structural cost-cutting actions like consolidating operations and reducing overhead layers. Long-term, they're still eyeing that 19-20% margin range for C This episode includes AI-generated content.
