RTX earnings rose sharply in the third quarter of 2026, and the aerospace and defense company raised its full-year sales, adjusted profit and free cash flow forecasts on October 20. Sales increased 11% to $25 billion, while adjusted earnings per share climbed 33% to $2.26, including a $0.25 benefit from cost recovery under the International Emergency Economic Powers Act, or IEEPA.
Key Takeaways
- More than $81 billion in new commercial and defense awards pushed backlog to a record $340 billion.
- All three businesses increased adjusted operating profit, but cost recoveries contributed materially to the gains.
- RTX raised its annual outlook despite quarterly free cash flow falling 47% from a year earlier.
Table of Contents
- RTX earnings growth includes a substantial recovery benefit
- Defense contracts lift the order book
- Aftermarket demand supports Collins and Pratt
- Higher annual targets face a different fourth-quarter mix
- Conclusion
RTX earnings growth includes a substantial recovery benefit
RTX’s third-quarter 2026 results announcement showed organic sales growth of 12%, excluding currency effects, acquisitions, divestitures and specified items. Commercial aftermarket sales increased 16%, while commercial original equipment and defense sales each rose 10%.
GAAP earnings per share increased to $1.89 from $1.41 a year earlier. Adjusted EPS excluded $0.26 of acquisition accounting adjustments and $0.11 of restructuring and other significant or non-recurring items, but retained the $0.25 IEEPA recovery benefit.
Adjusted segment operating profit reached approximately $3.9 billion, up 39%. Segment margins expanded 310 basis points, with roughly 160 basis points attributable to IEEPA recoveries. The distinction matters because the quarter’s profit improvement combined operating growth with a substantial recovery benefit.
Cash generation moved in the opposite direction from earnings. Operating cash flow declined 38% to $2.9 billion, and free cash flow fell 47% to $2.1 billion. Both included approximately $300 million of IEEPA recovery.
| Item | Details |
|---|---|
| 2026 adjusted sales | Raised to $97.0–$97.5 billion from $95.0–$96.0 billion |
| 2026 organic sales growth | Raised to 10%–11% from 8%–9% |
| 2026 adjusted EPS | Raised to $7.65–$7.75 from $7.10–$7.25 |
| 2026 free cash flow | Raised to $9.0–$9.2 billion from $8.50–$8.75 billion |
Defense contracts lift the order book
The record backlog comprised $176 billion of commercial business and $164 billion of defense business. Total backlog rose 36% from a year earlier and 18% from the previous quarter.
Defense bookings approached $59 billion, including approximately $23 billion for Tomahawk and more than $14 billion for AMRAAM. RTX received multi-year undefinitized production contracts for both missile programs during the quarter.
The orders expand future production commitments rather than represent revenue already earned. Chief Financial Officer Neil Mitchill said the munitions contracts would contribute a little revenue in 2026, with production expected to ramp over the following two years and reach full rates across the suite of munitions in 2030.
Chief Executive Officer Chris Calio identified the supply chain as the biggest enabling factor for planned production increases. Component availability, including printed circuit boards, capacitors and resistors, remains a constraint as defense suppliers compete with demand from artificial intelligence infrastructure.
Aftermarket demand supports Collins and Pratt
Collins Aerospace sales rose 10% to $8.4 billion, and adjusted operating profit increased 50% to approximately $1.8 billion. Higher commercial volume, sales mix and approximately $250 million of IEEPA recovery supported the improvement.
Pratt & Whitney sales increased 10% to $9.2 billion. Commercial aftermarket growth of 21% more than offset a 5% decline in commercial original-equipment sales, which reflected large commercial engine mix.
Pratt’s adjusted operating profit rose 29% to $968 million, including approximately $160 million of IEEPA recovery. Its reported operating profit, however, fell 19% to $608 million after a $363 million charge related to a customer bankruptcy.
Raytheon sales grew 14% to $8.0 billion, driven by naval programs and land and air defense systems. Adjusted operating profit increased 32% to approximately $1.1 billion, supported by productivity, higher volume and favorable mix.
Higher annual targets face a different fourth-quarter mix
RTX increased all three headline financial forecasts for 2026 and raised its organic sales growth expectation. These remain management projections rather than completed results.
Mitchill said Collins’ fourth-quarter margin would face pressure from the absence of IEEPA refunds, higher research and development and digital spending, and a greater proportion of original-equipment volume. Management nevertheless expects operational margins at Collins to continue expanding in 2027.
Conclusion
The fourth quarter will test RTX’s progress toward its higher annual targets as recovery benefits recede at Collins. Beyond 2026, the planned munitions production ramp will depend on expanding supplier capacity and converting the enlarged backlog into deliveries.
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