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we now see Raytheon's 2020 to 2025 annual growth rate to be between 1% and 2.5%, which is down from our prior outlook of between 5.5% to 7.5%.
lowered earnings expectations for Raytheon
Transcript
2023 Q4
9 Feb 24
Thanks, Myles, Good morning.
Let me start.
Let me maybe start to frame the answer to that question with a little bit of an updated walk between '23 and '25 on free cash flow to get to the $7.5 billion. And then I'll talk about what obviously offset the reduction in the profit as part of that.
So as we look from '23 of $5.5 billion, that $2 billion increase is going to come principally from what I would call operational growth, about $4.8 billion, $2.9 billion of which is going to come from the segment operating profit, and Neil pointed out that, that will be lower than our prior guide, and that's around the midpoint. The remaining growth is going to come from working capital improvement, about $2.2 billion, about half of which we will deal with here in '24 as we look to hold our inventory flat.
So our '23 headwind operationally was about $1 billion -- $600 million rather.
So we're looking year-over-year to improve that. And then we'll have about a half of -- I'm sorry, $400 million of CapEx between '23 and '25.
So that will be a headwind. And then I just talked about the $1.5 billion powder metal impact and about $1 billion headwind that's split pretty evenly between -- sorry pretty evenly between interest and improvement in taxes. And then, finally, a few hundred million dollars of pension headwind.
All of that should get you to $7.5 billion.
So what's changed as we look out to 2025, there's been really 3 things that are different.
The first is, we've got about $1 billion net of tax lower operating profit baked into this long-term guide, but that's been offset by about $700 million of improvement in taxes, most notably on the back of improvements in our R&D position as well as a couple of hundred million dollars based on the assumptions we see today with respect to our pension outlays and then a little bit of additional working capital.
So those are the key drivers.
only getting to 7.5bn due to tax improvement -- 1bn lower op profit
Transcript
2023 Q4
9 Feb 24
So your cash flow hit from a powdered metal issue is $300 million higher in you said, can you tell us how big was the impact in '23? And are we still going to be at $3 billion, and therefore, there's a plus of $300 million pickup in '25?
Neil Mitchill
It's Neil. Yes, I'll take that one.
So as Chris was just talking about, when we closed out '23, for a variety of reasons, the cash flows shifted to the right.
So the impact in '23 for powder metal related disbursements was essentially 0.
So we moved about half of that into 2024. That's the $1.3 billion that you're seeing, still holding $1.5 billion in our '25 outlook, and then we see the rest spilling into early 2026.
And so we'll continue to work, obviously, the agreements with our customers, and that will drive the ultimate timing of the payments, but you can see our assumptions that we've laid out there.
fcf hit spillover
Transcript
2023 Q4
2 Feb 24
We're actually having those discussions, Doug. I've been part of many of them. Again, customer by customer, looking at their engines by serial number. Again, because you've got to look at the cycle times on those and bounce them off against the fleet management plan, so it's a rigorous, thorough process, but we're having those conversations with customers so they understand their specific impacts.
As we said back on the September call, the lion's share of these incremental shop visits that we're going to have, the 600 to 700 in that '23 to '26, but 2/3 of those are '23 and relatively early in '24. That's what causes that bow wave, Doug, that peak of 650 AOGs. And I think we talked earlier about when we're going to provide some of those service bulletins and the ADs that are going to follow on.
So those communications are happening, but you're going to see that impact early in '24.
increjental shop vsis in 2023 and 2024
Transcript
2023 Q3
25 Oct 23
Pratt & Whitney
pratt & w
Transcript
2023 Q3
25 Oct 23
So I think I mentioned earlier in the conversation, we've seen about $3 billion of orders so far related to Ukraine replenishment. And that's really the replenishing U.S. war stocks.
We expect another $4 billion of orders in the next 2 years.
ukraie related orders
Transcript
2023 Q3
24 Oct 23
We are comfortable with our $7.5 billion 2025 free cash flow target that we've talked about.
comfortable with 2025 7.5bn target
Transcript
2023 Q3
24 Oct 23
ou heard Neil talk about the 1.17 book-to-bill in the quarter -- or excuse me, year-to-date, the $7.4 billion in bookings in the quarter and the overall backlog of $50 billion.
So really strong demand for the products.
That said, we have had some headwinds. We've had some inflation hitting some fixed-price programs. We've had a handful of challenging fixed-price development contracts that have been a bit of a drag.
That said, we have had some productivity gains in certain areas.
As you might suspect, those mature, higher-volume programs.
We have had some efficiency gains by leveraging supply chain with larger buys. And as we look forward, the supplier volume is growing. Labor attrition rates are decreasing, frankly, stabilizing.
So those are some very positive signs as kind of we look forward in the defense business.
And I will say we just need to get through key milestones on those fixed price development contracts. We've talked about those on several calls now. And we've got some key milestones coming up over the next 12 months or so that we've got to hit and get these programs through those milestones and then, ultimately, sold off.
defense colour
Transcript
2023 Q3
24 Oct 23
On the defense side, we continue to expect strong international and domestic demand, which has already driven a 2023 year-to-date book-to-bill of 1.22 and a record defense backlog that will continue to convert to solid growth over the next several years.
While inflation has begun to moderate, there are still pockets that remain persistently high within our manufacturing base.
We expect this to continue into the next year. We'll continue working all the mitigation actions we've had in place in the past 2 years, and we'll implement additional strategic initiatives to offset the pressure we expect to see in 2024.
defense, inflaton persistentky high
Transcript
2023 Q3
24 Oct 23
For the full year, we continue to expect sales to be up low to mid-single digits. With respect to operating profit, while the supply chain continues to improve, as evidenced by the increase in material receipts we have seen in the last 3 quarters, Raytheon continues to have productivity and mix challenges. This stemmed from a combination of the fixed price development programs we have previously discussed as well as higher production costs.
As a result, we're reducing Raytheon's adjusted operating profit from the prior range of up $125 million to $175 million to a new range of up $25 million to $75 million versus the prior year.
lowred guidance due to ongoig supply chain issues
Transcript
2023 Q3
24 Oct 23
For the full year, given the continued strength in commercial OE and aftermarket, we now expect Collins' sales range to be up low to mid-teens, an increase from the previous range of up low double digits to low teens. With respect to operating profit, we are maintaining adjusted operating profit in our prior range of up $825 million to $875 million versus the prior year.
collins guidancd
Transcript
2023 Q3
24 Oct 23
Looking ahead, due to higher commercial OE and military volume, we now expect Pratt's adjusted sales to be towards the higher end of our prior range or up mid-teens versus prior year.
upgrade to pratt guodance
Transcript
2023 Q3
24 Oct 23
Collins
collins
Transcript
2023 Q3
24 Oct 23
Our backlog is now a record $190 billion, with a pipeline of both existing franchises and new technology developments.
backlog 190 bn
Transcript
2023 Q3
24 Oct 23
As you saw in the press release this morning, we have finalized the charge recorded here in the quarter, which is in line with what we had previously disclosed.
So just a few thoughts on the powder metal issue. Through the early stages of removals and inspections of the PW1100 engine, which powers the A320neo aircraft, our outlook, both financially and operationally, remains consistent with our expectations. We've also made significant progress on the safety assessments for the other Pratt & Whitney-powered fleets. That includes the PW1500, which powers the A220; the PW1900, which powers the Embraer E2; and the V2500, which powers the legacy A320.
With the analyses substantially complete, we do not expect any significant incremental financial impact as a result of those fleet management plans. The focus of both Pratt & Whitney and the entire RTX organization is on maintaining the trust of our customers and our partners, and we are relentlessly working to improve upon the plans we have in place today.
powder coating issue
Transcript
2023 Q3
24 Oct 23
Pratt & Whitney.
p & w
Transcript
2023 Q3
24 Oct 23
On the powder metal, are you able to bound at this point whether you expect the free cash impact next year to be larger or smaller than this year, and then also following up on the Raytheon defense margins, can you just spend another minute on the fixed price development programs you’re citing - which ones are they, when do they move out of the development phase, and how do they play into the multi-year margin expansion you’re expecting?
Neil Mitchill
Sure, yes.
First of all on the free cash flow, again Noah, I hate to keep saying this, but we really need a little bit more time to put a finer point on our estimates, and we will come back to you on that part as it relates to ’24 and beyond. But I think we’ve talked at length about what the considerations are there and how we’ll be thinking about that, and that there is a possibility that some of these shop visits are already planned and there will be effects that counterbalance some of this in the out years, so more to come on that front.
fcf impact in 2024
Transcript
2023 Q2
30 Jul 23
Okay, and a quick follow-up, you keep mentioning fall-out rate, low fall-out rate. I assume that is where you actually have to replace the high pressure turbine discs. What exactly have you assumed in terms of a fall-out rate, and given it sounds like the inspection here is pretty involved, how much more involved would it be and costly to be to actually replace the high pressure turbine blades versus just the inspection--or discs, sorry?
Christopher Calio
Yes, so you’re absolutely right - that’s what fall-out rate means, those that we inspect and decide need to be removed and replaced.
Our experience has been that’s been very, very low. If of course we had to replace the turbine disc, then we’d factor that into the turnaround time and that will of course potentially add some time to the process. But as of now, again David, our assumption--and we’re continuing to work through that and through the month of August here, but our assumption based on everything that we’ve seen thus far is that the fall-out rate will be very low, and that’s what’s embedded in our assumptions today.
Gregory Hayes
David, keep in mind in order to do the inspection, as Chris said, we literally have to pull the high pressure turbine disc off of the engine and put it through this inspection protocol.
Now, whether we put that disc back on or a brand-new one, it’s not a significant impact, and again with a very, very low expected fall-out ratio, I wouldn’t--of all the things I worry about, that would be low on the list.
fall out rate and assumptions
Transcript
2023 Q2
30 Jul 23
Then lastly, do you think you’re going to learn enough by the time we have the October earnings call to provide us a little bit more clarity on things, or do you think this is going to be a discovery process that takes us out a number of months, into the end of the year?
Gregory Hayes
Jason, we’re discovering something new every day here, so I think--all I would tell you is that over the next, I would say six weeks as we finalize the inspection protocols, as we finalize the turn times and work with our customers, keep in mind we’re trying to get the first 200 engines back by the middle of September, so I think by the middle of September, we’ll have a much better feel for what is involved here. We’ll have an opportunity to update everybody around that time.
I think by the time we get to October, obviously we’ll know even more as we go through some of the initial inspections, so this is a learning process.
more detail by mid october
Transcript
2023 Q2
30 Jul 23
You’ve got to take the engine off wing, you’ve got to disassemble the engine to get to that particular area. Unfortunately, based on the geometry and location of the part, you do have to remove the part to do this enhanced inspection capability, reassemble and then get it back out to the fleet.
details on what needs to be done
Transcript
2023 Q2
30 Jul 23