By Scott Hamilton
Oct. 22, 2024, © Leeham News: RTX Corp, the parent of troubled engine maker Pratt & Whitney, posted strong financial results for the third quarter today.
PW continues to struggle with replacing engines plagued by technical defects that have grounded nearly 600 Airbus A320neos worldwide. But year-over-year financial results are markedly improved.
Another subsidiary, Collins Aerospace, which makes a variety of components and interiors, reported higher results YOY.
RTX reported $20.1bn in revenues (+6% YOY)m operating cash flow of $2.5bn, free cash flow of $2bn, and returned $1.1bn of capital to shareholders. Net income was $1.472bn vs a loss of $984m in the prior year.
PW reported $7.2bn in revenue for the period vs a mere $926m in 3Q2023. The operating profit was $557m vs a loss of $2.48bn. Despite all the costs taken against the Geared Turbo Fan engines as PW struggles to replace a defective powder on a large installed fleet, aftermarket maintenance, repair and overhaul work drive the YOY improvements on the commercial side. The defense side of PW also saw a 20% increase in revenues.
Collins is hampered by delays in its interiors division, but revenues were up 7% YOY, largely through a 14% increase in components sales to the military. The commercial aftermarket was up 9%. Collins reported an operating profit of just over $1bn on sales of $7.07bn.
Despite these positive results, investment bank Goldman Sachs reported the results were below consensus.
“Segment Earnings Before Interest and Taxes (EBIT) is below driven by the Collins margin. Revenue is ahead at Pratt, and slightly below at Collins and Raytheon. EBIT is ahead at Pratt and Raytheon and below at Collins. Segment EBIT margin of 11.4% is below implied consensus at 11.9%,” Goldman wrote.
For the 9 months, RTX reported improved results even if lower than Wall Street’s consensus.
Revenue was $59.1bn vs $49bn. The Operating profit was $4.4bn vs $1.8bn. The net profit was $3.3bn vs $1.8bn.
PW’s profit margin of 7.6% was the lowest of RTX subsidiaries, but a major improvement compared with 2023. For the nine months last year, its negative margin was 15.5%. For the nine months, PW reported a profit of $1.56bn vs a loss of $1.8bn.
Since the introduction of the GTF, customers have been bedeviled with one technical issue after another—all unrelated to the gearbox itself. Currently, a powdered metal used in production was found to be defective. This requires grounding the affected airplanes until replacements can be delivered. There are currently almost 600 Airbus A320s on the ground.
CEO Chris Calio said progress is slow, but replacements are getting to the affected airlines.
“First and foremost is our GTF fleet management plan,” Calio said. “We remain on track, and our financial and operational outlook remains consistent with our prior comments. At the end of Q3, our inspections of powdered metal parts continue to progress according to plan.
“The associated fallout rate remains below the 1% expectation. The findings are consistent with the underlying assumptions of our fleet management plan. At our MRO facilities, throughput of engines is improving. PW-1100 output increased 10% sequentially and 27% on a year-over-year basis.”
Calio said PW reached support agreements with 28 customers, covering roughly 75% of the impacted PW-1100 fleet. The terms continue to remain in line with assumptions.
All new production engines have the correct powdered metal installed.
“We’re going to really start to turn the corner on the insertion of powdered metal parts as we head into 2025 as we continue to ramp up the exothermal forging,” the CE O said. “We’re putting in place continued capacity in all pieces of that value stream to continue to ramp in 2025.”
Ironic that GE now only has as much market share in Single Aisles as PW! (granted that is because no MAX being cranked out – but then maybe never again so …….).
LEAPs not getting put on MAX airframes!
P&W in the meantime has a close to 50% market share and as they have the fixes in place on production GTF, they may get more going forward.
The installed fleet of GTF is working their way through shop visits to get all the problems fixed and the one PW had not control over with the metal debacle.
Or as our fastener company did, build a lab in the US to test all the fasteners coming in to be sure them thar off shore operations ain’t putting crud into your system.
We had a Hangar start to go up and then came down. Welds were failing the Seis 4 zone spec. Ok, where are your XRays? Well we don’t take XRays.
So, you build to spec but don’t have any proof, the engineers put the spec in but don’t check to see if there is any proof and ………
I think they sold the package into Candada where they had a lower seismic spec.
GE gets to sell some CFM engines for the P-8 and E-7!
Most GTF’s will be back in shop for the Advantage update, probably starting with those with limited disk life after inspections of service run units installed back into engines. PWA will get good use of all engine shops working full steam now on disk replacements/inspections for upcoming shop visits/upgrades
Well you gotta love all the spin from PW. Man, could they have used more buzz speak in that statement?
No data (I have seen the data and it does support it getting better). Kind of like Pablum for a 1 year old. Sheese.
According to plan? Well the ever revised plan that we wound up having to do a panic move to.
As a tech I have to wonder what the paperwork looked like on that powdered metal?
It should be tested at the last stop before delivery to PW (or its mfg ops who actually make the parts if its not PW).