RTX Beats on Q2 Earnings & Sales, Lowers '25 EPS View

RTX Corporation reported strong Q2 2025 results, with adjusted EPS of $1.56 and sales of $21.58 billion, both surpassing analyst estimates and demonstrating year-over-year growth across all three segments. However, the company issued mixed 2025 guidance, cutting its adjusted EPS forecast to $5.80-$5.95 while simultaneously raising its sales outlook to $84.75-$85.50 billion, suggesting a potential margin compression despite increased revenue expectations.

Analysis

RTX Corporation reported a strong second quarter for 2025, surpassing consensus estimates on both revenue and earnings. The company posted adjusted EPS of $1.56, a 10.6% year-over-year increase and 7.6% above the $1.45 estimate, while sales grew 9.4% to $21.58 billion, beating the $20.53 billion forecast. This top-line growth was broad-based, with notable strength across all three segments: Pratt & Whitney led with 12.2% growth driven by commercial aftermarket and OEM sales, followed by Collins Aerospace at 8.9% and Raytheon at 6.4%. However, this robust quarterly performance is tempered by a mixed full-year 2025 outlook. Management lowered its adjusted EPS guidance to a range of $5.80-$5.95 from a prior $6.00-$6.15, while simultaneously raising its sales forecast to $84.75-$85.50 billion. This divergence signals anticipated margin compression for the remainder of the year. Furthermore, a notable concern arises from the sharp year-over-year decline in free cash flow, which fell to $0.72 billion from $2.07 billion, despite the company maintaining its full-year FCF guidance of $7.0-$7.5 billion.

Key Decisions for Investors

• Investors should scrutinize the drivers behind the lowered EPS guidance, as the implied margin compression presents the primary risk despite the stronger sales outlook.
• The significant drop in quarterly free cash flow warrants close monitoring, as achieving the reaffirmed full-year target of $7.0-$7.5 billion will require a substantial acceleration in cash generation in the second half of the year.
• Given the mixed signals, it is prudent to evaluate the sustainability of the commercial aftermarket boom against potential execution risks or slowing growth in the defense portfolio.
• Consider the current Zacks Rank of #4 (Sell) as a tactical signal, weighing the strong quarterly execution against the forward-looking concerns about profitability and cash flow.