RTX Corp. (NYSE:RTX)

The company has consistently reported negative economic profit from 2021 through 2025, indicating that net operating profit after taxes (NOPAT) remained insufficient to cover the weighted cost of invested capital. Despite the persistent value destruction over this five-year period, there is a significant positive trend toward the break-even point, driven primarily by a sharp increase in operating profitability in the final two years.

Net Operating Profit After Taxes (NOPAT)

A U-shaped trajectory is observed in NOPAT. After a period of decline from US$ 5,054 million in 2021 to a low of US$ 4,118 million in 2023, profitability experienced accelerated growth. NOPAT rose to US$ 6,483 million in 2024 and reached US$ 9,351 million by 2025, representing a substantial recovery and an increase of approximately 127% from the 2023 trough.

Invested Capital and Cost of Capital

Invested capital remained relatively stable, with a slight downward trend from US$ 111,815 million in 2021 to US$ 107,593 million in 2024, followed by a marginal increase to US$ 109,085 million in 2025. Simultaneously, the cost of capital fluctuated within a narrow band, starting at 8.72% in 2021 and ending at its highest point of 9.39% in 2025. This stability in the capital base suggests that the improvements in economic profit were not the result of divestitures or capital reductions, but rather gains in operational efficiency.

Economic Profit Trends

Economic profit reached its lowest point in 2022 at negative US$ 5,205 million. However, a consistent recovery trend is evident from 2023 onward. The deficit narrowed to negative US$ 5,083 million in 2023, improved to negative US$ 3,164 million in 2024, and further reduced to negative US$ 894 million by 2025. The narrowing of this gap is directly correlated with the surge in NOPAT, which began to offset the capital charge more effectively.

In summary, while the company failed to generate positive economic value added during the period analyzed, the trajectory suggests a transition toward value creation. The combination of stabilizing invested capital and rapidly increasing NOPAT has significantly reduced the economic loss, positioning the company to potentially achieve a positive economic profit in the immediate subsequent period.

Net income attributable to common shareowners and net operating profit after taxes (NOPAT) exhibited distinct performance patterns over the five-year period. While net income demonstrated volatility, NOPAT showed a generally positive trajectory, particularly in the later years.

Net Income Trend

Net income attributable to common shareowners increased from US$3,864 million in 2021 to US$5,197 million in 2022, representing a substantial gain. However, this was followed by a decrease to US$3,195 million in 2023. A recovery was observed in 2024, with net income reaching US$4,774 million, and continued growth into 2025, reaching US$6,732 million. This indicates fluctuating profitability for shareowners.

NOPAT Trend

NOPAT began at US$5,054 million in 2021, then decreased to US$4,663 million in 2022 and further to US$4,118 million in 2023. A significant increase occurred in 2024, with NOPAT rising to US$6,483 million. This upward trend continued strongly into 2025, reaching US$9,351 million. This suggests improving operational efficiency and profitability, independent of capital structure and taxes.

Relationship between Net Income and NOPAT

While both metrics moved in the same general direction (increasing in 2022 and 2025), the magnitude of change differed. The decline in 2023 was more pronounced for net income than for NOPAT. Furthermore, the substantial increase in NOPAT in 2024 and 2025 was greater than the corresponding increase in net income, suggesting potential changes in financing costs or tax rates impacting the bottom line.

Overall Assessment

The observed trends suggest a strengthening of core operational profitability, as evidenced by the NOPAT figures. Despite fluctuations in net income, the consistent growth in NOPAT over the latter part of the period indicates improved underlying business performance. Further investigation into the factors driving the divergence between net income and NOPAT would be beneficial.

The reported income tax expense demonstrates volatility over the five-year period. Initial values decreased significantly between 2021 and 2023, followed by substantial increases in 2024 and 2025. Conversely, cash operating taxes exhibited a different pattern, with a large increase in 2022, followed by a decrease in 2023, and then a moderate increase through 2024 before declining slightly in 2025.

Income Tax Expense Trend

Income tax expense began at US$786 million in 2021, decreasing to US$700 million in 2022, and then falling considerably to US$456 million in 2023. A significant rise occurred in 2024, reaching US$1,181 million, and continued upward to US$1,664 million in 2025. This indicates increasing tax obligations in the latter part of the period.

Cash Operating Taxes Trend

Cash operating taxes started at US$1,158 million in 2021, then increased substantially to US$2,635 million in 2022. This was followed by a decrease to US$1,197 million in 2023. Values then rose to US$1,638 million in 2024, before decreasing slightly to US$1,258 million in 2025. The 2022 peak suggests a potentially large, temporary tax payment or a change in tax regulations impacting cash flow.

Relationship Between Income Tax Expense and Cash Operating Taxes

A divergence is apparent between income tax expense and cash operating taxes. While income tax expense decreased from 2021 to 2023, cash operating taxes initially increased and then decreased. This suggests timing differences between when taxes are recognized for accounting purposes (income tax expense) and when cash is actually paid (cash operating taxes). The increasing income tax expense in 2024 and 2025 does not directly correlate with the cash operating taxes, which plateaued and then slightly decreased, indicating a potential build-up of deferred tax liabilities or assets.

The fluctuations in both metrics warrant further investigation to understand the underlying drivers, including changes in tax laws, profitability, and the utilization of tax credits or loss carryforwards. The difference between the two figures suggests a significant impact from non-cash tax items.

The composition of invested capital at RTX Corp. exhibits fluctuations over the five-year period. Total reported debt & leases and shareowners’ equity are the components used to derive invested capital, and their individual trends contribute to the observed patterns.

Invested Capital Trend

Invested capital decreased from US$111,815 million in 2021 to US$109,971 million in 2022, representing a decline of approximately 1.7%. A further decrease was noted in 2023, falling to US$108,443 million. 2024 saw a slight reduction to US$107,593 million. However, 2025 witnessed a modest increase, with invested capital rising to US$109,085 million. Overall, the trend suggests relative stability with a slight downward trajectory, followed by a minor recovery in the most recent year.

Debt & Leases

Total reported debt & leases increased from US$33,553 million in 2021 to US$33,856 million in 2022, a minor increase. A substantial rise occurred in 2023, reaching US$45,587 million. This was followed by a decrease in 2024 to US$43,260 million, and a further reduction in 2025 to US$39,956 million. The significant increase in 2023, followed by subsequent declines, suggests potential shifts in financing strategies or capital structure adjustments.

Shareowners’ Equity

Shareowners’ equity experienced a slight decrease from US$73,068 million in 2021 to US$72,632 million in 2022. A more pronounced decline was observed in 2023, falling to US$59,798 million. A small increase occurred in 2024, reaching US$60,156 million, and a further increase was seen in 2025, with equity rising to US$65,245 million. The decrease in shareowners’ equity, particularly in 2023, may be attributable to factors such as share repurchases, dividend payments, or retained earnings performance.

The interplay between debt & leases and shareowners’ equity shapes the overall invested capital figure. The decrease in invested capital between 2021 and 2024 appears to be driven by a combination of decreasing equity and fluctuating debt levels. The slight increase in invested capital in 2025 is likely due to the combined effect of increased equity and decreased debt.

The analysis of economic value creation indicates a persistent negative economic profit throughout the five-year period, although a strong recovery trend is evident from 2023 through 2025. While the entity has not yet achieved a positive economic spread, the narrowing of losses suggests an improving alignment between the return on invested capital and the cost of capital.

Economic Profit Trends

Economic profit remained negative across all observed years, reaching a peak deficit of -5,205 million US$ in 2022. Following this low point, a consistent upward trajectory is observed, with losses reducing to -3,164 million US$ in 2024 and further improving to -894 million US$ by the end of 2025. This represents a significant reduction in value destruction over the final three years of the period.

Invested Capital Stability

Invested capital exhibited relative stability, fluctuating within a narrow range between 107,593 million US$ and 111,815 million US$. A gradual decline was noted from 2021 to 2024, followed by a slight increase to 109,085 million US$ in 2025. The stability of the capital base suggests that the improvement in economic profit is primarily driven by operational performance and returns rather than a systemic reduction in the capital employed.

Economic Spread Ratio Analysis

The economic spread ratio mirrored the trend of economic profit, recording a minimum of -4.73% in 2022. Subsequent years show a steady recovery, with the ratio improving to -2.94% in 2024 and reaching -0.82% in 2025. This movement indicates that the spread between the return on invested capital and the cost of capital is closing, bringing the entity closer to the threshold of positive economic value added.

The financial trajectory from 2021 to 2025 is characterized by a consistent expansion in top-line revenue coupled with a substantial reduction in economic losses, indicating a steady progression toward positive economic value creation.

Net Sales Performance

A sustained upward trend in net sales is observed, with revenue increasing from 64,388 million US dollars in 2021 to 88,603 million US dollars by 2025. A notable acceleration in growth occurred between 2023 and 2024, where sales increased by approximately 17% within a single fiscal year.

Economic Profit Trends

Economic profit remained negative throughout the analyzed period, signifying that the company's returns did not exceed its weighted average cost of capital. However, following a peak deficit of 5,205 million US dollars in 2022, the economic loss narrowed significantly each subsequent year, ending at 894 million US dollars in 2025.

Economic Profit Margin Analysis

The economic profit margin reflects the recovery seen in absolute economic profit. After declining to a period low of -7.76% in 2022, the margin improved consistently, reaching -1.01% by December 31, 2025. This trend indicates an improvement in operational efficiency and a narrowing gap between the company's actual returns and the required return on capital relative to its sales volume.