RTX Corp. (NYSE:RTX)

The analysis of the current and deferred income tax expense data over the five-year period reveals several noteworthy trends. The current tax expense shows significant variability, with a notable peak in the year ending December 31, 2022, where it reached 2,363 million US dollars. This is a marked increase from the previous years and is followed by a sharp decrease to 858 million in 2023, before rising again to 1,228 million in 2024.

In contrast, the future (or deferred) income tax values are negative throughout the period, indicating deferred tax liabilities or reductions in deferred tax assets. The magnitude of these negative values fluctuates considerably, with a pronounced dip to -1,663 million in 2022, which corresponds to the peak in current taxes. Subsequently, the deferred tax amount decreases in absolute terms, moving to -402 million in 2023 and further to -47 million in 2024.

The overall income tax expense, which combines the effects of current and deferred taxes, does not mirror the peaks seen in current tax alone. It rises from 575 million in 2020 to 786 million in 2021, then slightly drops to 700 million in 2022 despite the surge in current taxes, suggesting the substantial negative deferred tax adjustments during that year tempered the overall expense. A further decrease to 456 million in 2023 aligns with lower current tax and a reduction in deferred tax liabilities. However, in 2024, there is a sharp increase to 1,181 million, the highest level in the observed period, indicating a combined increase in current tax and the near normalization of deferred tax amounts.

Current Income Tax Trends

Significant spike in 2022 followed by fluctuations, indicating variable taxable income or changes in tax regulations affecting current liabilities.

Deferred Income Tax Trends

Consistently negative with a peak deferred tax impact in 2022; suggests large adjustments in deferred tax assets or liabilities that partly offset current taxes that year.

Overall Income Tax Expense

The total income tax expense is moderated by deferred tax fluctuations, exhibiting less volatility than current tax alone but showing an overall upward trend by 2024.

In summary, the data illustrates a complex interplay between current and deferred income tax expenses, with deferred tax positions significantly influencing the net income tax expense. The year 2022 stands out as atypical, reflecting major tax adjustments that warrant further investigation to understand the underlying factors driving the substantial deferred tax changes.

The analysis of the tax-related financial metrics reveals several notable trends over the five-year period ending in 2024. The statutory U.S. federal income tax rate remained constant at 21% throughout, indicating stability in the baseline tax framework applied.

Tax on International Activities

This item showed a negative to near-neutral impact over time, beginning at -1.1% in 2020, reaching a low of -4.1% in 2021, and gradually reverting towards zero by 2024. This suggests decreasing tax benefits or liabilities associated with international operations.

Tax Charges Related to Separation of Carrier and Otis and Raytheon Merger

Significant negative impacts were recorded in the earlier years (notably -17.7% in 2020 and -0.8% in 2021), with no charges noted thereafter, reflecting a one-time event influencing tax rates in the initial periods.

Disposals of Businesses

There is a transition from a negative impact of -7.5% in 2020 to a slight positive impact by 2021 (2.2%) and again a minor positive adjustment in 2024 (2%), indicating variability in the tax effects from business disposals.

U.S. Research and Development Credit

This credit contributed positively in 2020 (6.1%) but shifted to a negative influence in subsequent years, reaching -4.4% in 2023 and -3.0% in 2024. This downward trend may point to changes in the utilization or availability of R&D tax credits.

U.S. Federal Audit Settlements and Statute Lapse

The effects appeared only in the later years, showing increasing negative impacts of -1.5% in 2022 and -4.5% in 2023, indicating rising settlements or adjustments affecting tax expenses.

Goodwill Impairment

A significant negative charge occurred in 2020 (-28.4%), with no subsequent data, suggesting a major impairment event in that year only.

State Income Tax, Net

Fluctuations were moderate, beginning at 2.4% in 2020, decreasing to a slight negative in 2022 (-0.2%), and rising again to 3% by 2024, reflecting variable state tax impacts.

Foreign Derived Intangible Income (FDII)

A decline in tax benefits is indicated by the move from a positive 3.5% in 2020 to consistent negative values through 2024, though the magnitude of the negative impact diminished slightly towards the end.

Non-deductible Legal Charges

The effect was negligible until 2023 and 2024, where it increased from 0.1% to 2.4%, suggesting rising legal expenses that impacted taxable income in the final years.

U.K. Corporate Tax Rate Enactment

A minor negative effect occurred in 2020 (-0.4%), followed by a positive impact in 2021 (1.5%) with no further data available, indicating a temporary influence of tax legislative changes in the UK.

Other

Relatively stable and low impacts fluctuating slightly from negative in 2020 (-2.3%) to minor positive or near-zero figures in subsequent years.

Effective Income Tax Rate

The overall effective income tax rate shifted dramatically from a highly negative rate of -24.4% in 2020 to positive figures thereafter, with rates stabilizing around 11.6% to 19.1% from 2022 to 2024. This suggests a normalization of tax expenses following exceptional adjustments in 2020.

In summary, the data reflects significant one-time tax events early in the period, including merger-related charges and goodwill impairment, which heavily influenced the effective tax rate and related components. Over time, the tax impacts of ongoing activities, such as disposals, R&D credits, state taxes, and legal charges, showed more moderate fluctuations. The effective tax rate trend indicates a return to more typical tax expense levels after anomalous early-year figures.

The financial data reveals several notable trends and shifts over the period from 2020 to 2024.

Insurance and employee benefits

There is a consistent decline from US$3,004 million in 2020 to US$897 million in 2024, indicating significant reduction in related costs or reserves over the five years.

Inventory and contract balances

The inventory and contract balances decreased steadily from US$822 million in 2020 to US$571 million in 2023, with a reported negative value in 2024, which may indicate reclassification, write-offs, or other adjustments.

Warranty provisions

Warranty provisions remained relatively stable, fluctuating slightly around the 220–248 million range, and ending at US$221 million in 2024, suggesting consistent warranty-related liabilities.

Capitalization of research and experimental expenditures

Research and experimental expenditures capitalized began appearing in 2022 at US$1,712 million, remained steady in 2023 at US$1,631 million, and increased markedly to US$2,208 million in 2024, signifying an intensification of investment in research and development activities.

Other basis differences

This category grew from US$637 million in 2020 to US$1,060 million in 2024, despite a slight dip in some years, reflecting increasing timing or valuation differences affecting tax bases.

Powder Metal Matter

This item first appears in 2023 with US$644 million and declines to US$455 million in 2024, which could be related to a specific one-time event or asset component decreasing in value.

Tax loss carryforwards

A steady increase is visible from US$196 million in 2020 to US$1,055 million in 2024, reflecting a growing amount of tax losses available to offset future taxable income.

Tax credit carryforwards

There is a mild downward trend in tax credit carryforwards, reducing from US$959 million in 2020 to US$800 million in 2024, indicating utilization or expiration of available tax credits.

Future income tax benefits, gross

These benefits fluctuate but exhibit an overall growth from US$5,838 million in 2020 to US$6,696 million in 2024, implying increasing expected tax benefits due to deductible temporary differences and carryforwards.

Valuation allowances

The valuation allowances deepened substantially, from -US$757 million in 2020 to around -US$1,439 million in 2024, suggesting growing uncertainty or reduced realizability of some deferred tax assets.

Future income tax benefits, net

The net future income tax benefits declined sharply in 2021 but recovered gradually from US$4,227 million in 2021 to US$5,257 million in 2024, indicative of improving realizability after allowance adjustments.

Goodwill and intangible assets

Goodwill and intangible assets declined year over year from -US$7,786 million in 2020 to -US$5,675 million in 2024, reflecting possible amortization, impairment, or disposals.

Fixed assets

Fixed assets slightly decreased from -US$1,637 million in 2020 to -US$1,614 million in 2024 after minor fluctuations, indicating relatively stable net fixed asset levels.

Inventory and contract balances (negative entry)

A negative value of -US$193 million is recorded in 2024, which may represent adjustments or corrections to previously reported balances.

Other basis differences (negative entry)

These differences turn increasingly negative over time, reaching -US$627 million in 2024 from -US$151 million in 2020, possibly reflecting adjustments or reversals of earlier positive basis differences.

Future income tax payable

Future income tax payable decreased in absolute terms from -US$9,574 million in 2020 to -US$8,109 million in 2024, indicating a gradual reduction in deferred tax liabilities.

Future income tax benefits and payable, net

The net position improved from -US$4,493 million in 2020 to -US$2,852 million in 2024, showing a trend towards decreasing net deferred tax liabilities.

Overall, the data indicate a company managing declining insurance and employee benefit liabilities, increasing capitalized research expenditures, and fluctuating deferred tax asset and liability positions. The growth in tax loss carryforwards and future income tax benefits suggests strategic tax planning efforts, while valuation allowances adjustments reflect ongoing reassessments of deferred tax asset realizability. The downward trend in goodwill and intangible assets hints at asset disposals or impairments. Inventory balances and related adjustments point to inventory management challenges or accounting realignments.

The annual financial data reveals a consistent downward trend in the future income taxes payable from the fiscal year ending December 31, 2020, through to December 31, 2024.

Future income taxes payable (US$ in millions)

In 2020, the value was reported at 4,493 million US dollars.

There was an increase in 2021, reaching 5,010 million US dollars, representing the peak over the five-year period.

Subsequently, a marked decline was observed in 2022, with the balance reducing to 3,579 million US dollars.

This downward trend continued steadily through 2023 and 2024, resulting in values of 3,015 and 2,852 million US dollars respectively.

This pattern suggests a strategic or operational shift leading to a reducing future tax liability. The initial increase in 2021 might reflect changes in temporary differences or adjustments in tax planning strategies, but the sustained decline thereafter could indicate improved tax management, the realization of tax assets, or changes in the company's income composition affecting deferred tax calculations.

The financial data reflects several notable trends regarding reported and adjusted liabilities, equity, and net income for the company over the five-year period from 2020 to 2024.

Total liabilities

Both reported and adjusted total liabilities show a gradual decline from 2020 through 2022, decreasing from approximately 88.3 billion USD (reported) and 83.8 billion USD (adjusted) in 2020 to around 84.7 billion USD (reported) and 81.1 billion USD (adjusted) in 2022. Starting in 2023, total liabilities increase significantly, reaching a peak in 2024 with reported liabilities at approximately 100.9 billion USD and adjusted liabilities close behind at 98.1 billion USD. This indicates a notable rise in the company's obligations in the last two years.

Shareowners’ equity

Reported shareowners’ equity remains relatively stable between 2020 and 2022, fluctuating slightly around the 72 billion USD mark. However, a significant decline is observed in 2023, dropping to 59.8 billion USD, and it remains near that level in 2024. Adjusted shareowners’ equity follows a similar trend, with somewhat higher values than reported equity during the initial years, peaking at about 78.1 billion USD in 2021 before declining steeply to around 62.8 billion USD in 2023 and remaining stable in 2024. The sharp decrease in equity values post-2022 suggests challenges affecting the company’s net assets.

Net income attributable to common shareowners

Reported net income exhibits a strong recovery from a loss of approximately 3.5 billion USD in 2020 to positive earnings peaking at about 5.2 billion USD in 2022. It then declines in 2023 to roughly 3.2 billion USD but rises again to approximately 4.8 billion USD in 2024. Adjusted net income follows a similar pattern but has notably lower figures since 2021, with the peak in 2022 at around 3.5 billion USD, dropping further to about 2.8 billion USD in 2023 before recovering near 4.7 billion USD in 2024. This pattern indicates variability in profitability, with a lower magnitude of adjusted income suggesting adjustments reduce reported profits notably.

Net Profit Margin

The reported net profit margin shows a significant recovery from a negative margin of -6.22% in 2020 to positive margins in subsequent years, peaking at 7.75% in 2022 before dipping to 4.64% in 2023 and rising slightly again to 5.91% in 2024. The adjusted net profit margin follows a similar trend, albeit slightly lower in all years, with a sharp increase in 2021 followed by a decline in 2023 and a rebound in 2024. This indicates improved profitability over time, with some volatility particularly in 2023.

Financial Leverage

The reported financial leverage remained relatively stable around 2.2 from 2020 to 2022, before increasing notably to 2.71 in 2023 and maintaining that level in 2024. The adjusted financial leverage mirrors this pattern, staying near 2.1 through 2020-2022, then rising to 2.58 in 2023 and 2024. This suggests the company increased its use of debt or other financing sources starting in 2023, potentially to support growth or other financial strategies.

Return on Equity (ROE)

Reported ROE showed a recovery from negative territory (-4.88% in 2020) to positive figures through 2021 to 2024, with a peak of 7.94% in 2024. Adjusted ROE also improved from -4.72% in 2020 to 7.5% in 2024, though its growth was more gradual and showed less volatility. The alignment of reported and adjusted ROE in later years reflects improved equity returns, with adjustments having more impact in early periods.

Return on Assets (ROA)

The reported ROA recovered from -2.17% in 2020 to a peak of 3.27% in 2022, followed by a decline to 1.97% in 2023 and a moderate increase to 2.93% in 2024. Adjusted ROA followed a similar path, though with lower absolute values, reaching 2.9% in 2024. This indicates that asset efficiency improved over the period but experienced some setbacks in 2023, consistent with trends seen in profitability metrics.

Reported Net Income (Loss) Attributable to Common Shareowners

The reported net income exhibited a significant turnaround from a loss of $3,519 million in 2020 to a profit of $3,864 million in 2021. This positive trend continued with growth to $5,197 million in 2022. However, there was a decline in 2023 to $3,195 million, followed by a recovery to $4,774 million in 2024. Overall, the reported net income displays volatility but trends positively over the five-year period.

Adjusted Net Income (Loss) Attributable to Common Shareowners

Adjusted net income similarly showed a sharp improvement from a loss of $3,618 million in 2020 to a positive result of $3,776 million in 2021. Unlike the reported measure, the adjusted net income declined more markedly to $3,534 million in 2022 and further to $2,793 million in 2023, before rebounding strongly to $4,727 million in 2024. The adjustments appear to moderate both the peak and trough outcomes, indicating some underlying items impacting reported figures.

Reported Net Profit Margin

The reported net profit margin improved from a negative margin of -6.22% in 2020 to 6.00% in 2021, then increased further to 7.75% in 2022. This margin decreased substantially to 4.64% in 2023 but showed recovery to 5.91% in 2024. The fluctuations suggest variability in profitability relative to revenues, mirroring the net income trends.

Adjusted Net Profit Margin

The adjusted net profit margin followed a similar pattern, beginning at -6.39% in 2020 and rising to 5.86% in 2021. It then declined to 5.27% in 2022 and decreased more notably to 4.05% in 2023 before recovering to 5.85% in 2024. The adjusted margin consistently remained slightly below the reported margin, indicating that adjustments reduced reported profitability margins across the periods.

Summary of Trends and Insights

Both reported and adjusted net income measures reveal a steady recovery from significant losses in 2020 to positive results in subsequent years, although adjusted figures show somewhat less pronounced gains and deeper dips in some years compared to reported figures. The net profit margins confirm profitability improvement with fluctuations that correspond to changes in net income levels. Adjustments appear to moderate earnings and margins, suggesting the presence of non-recurring or one-time items in the reported data. Despite some volatility, the general trend points to improving financial performance and profitability over the five-year period.

The data reveals a general downward trend in shareowners' equity for both reported and adjusted figures from 2020 to 2024. Reported shareowners' equity decreased from 72,163 million US dollars in 2020 to 60,156 million US dollars in 2024, marking a notable decline especially after 2022. Adjusted shareowners' equity follows a similar pattern, falling from 76,656 million US dollars in 2020 to 63,008 million US dollars in 2024. The decline is more pronounced after 2022, suggesting potential adverse impacts or adjustments affecting equity.

Examining financial leverage, both reported and adjusted leverage ratios remained relatively stable between 2020 and 2022, with reported leverage decreasing slightly from 2.25 to 2.19 and adjusted leverage fluctuating around 2.12 to 2.08. However, starting in 2023, a significant increase is observed in both reported and adjusted financial leverage ratios, rising from approximately 2.19 to 2.71 and from 2.08 to 2.58, respectively. This suggests an increased reliance on debt financing relative to equity in recent years.

The simultaneous decline in equity and rise in financial leverage ratios after 2022 indicates changing capital structure dynamics, potentially reflecting increased borrowing or reduced equity base. The adjusted figures, which account for deferred income tax impacts, closely mirror the trends in the reported data but consistently display slightly higher equity values and marginally lower leverage ratios, highlighting the impact of tax adjustments on the company’s financial position.

The financial data reveals distinct trends over the five-year period from 2020 to 2024 in terms of income, equity, and profitability ratios after adjustments for reported and deferred income taxes.

Net Income Attributable to Common Shareowners

Reported net income demonstrates significant volatility, with a substantial loss of $3,519 million in 2020 transitioning sharply to profits in subsequent years, peaking at $5,197 million in 2022 before moderating to $4,774 million in 2024. The adjusted net income follows a similar pattern but exhibits more tempered fluctuations with a large initial loss ($3,618 million in 2020) and lower subsequent profit levels, notably reduced in 2022 ($3,534 million) and 2023 ($2,793 million), before increasing again in 2024 ($4,727 million). This suggests adjustments primarily impact the magnitude of reported earnings, particularly dampening profit levels when normalized for deferred tax effects.

Shareowners’ Equity

Reported shareowners’ equity remains relatively stable from 2020 through 2022, hovering around $72,000 million, before experiencing a notable decline in 2023 to approximately $59,798 million and remaining near this level in 2024. Adjusted equity values consistently surpass reported figures, indicating that deferred tax adjustments enhance equity recognition. This adjusted equity follows a similar declining trend starting in 2023, from roughly $76,211 million to about $63,008 million by 2024, mirroring the reported equity decrease but retaining a higher absolute value throughout.

Return on Equity (ROE)

Reported ROE aligns closely with net income trends, moving from a negative -4.88% in 2020 to positive territory above 5% from 2021 onward. It peaks at 7.16% in 2022, dips to 5.34% in 2023, and rises again to 7.94% in 2024, reflecting the underlying earnings fluctuations. Adjusted ROE is consistently lower than reported ROE, reflecting the more conservative earnings used in its calculation. The adjusted ROE improves from a negative -4.72% in 2020 to a relatively stable range between 4.45% and 4.84% during 2021-2023, before increasing significantly to 7.5% in 2024. This pattern indicates a stabilization of profitability when accounting for deferred tax adjustments with a marked improvement in the most recent period.

Overall, the data depicts a recovery from a significant loss position in 2020 towards sustained profitability in subsequent years, although adjusted income and profitability metrics suggest a more cautious interpretation of performance. The decreases in equity values starting in 2023 may warrant further investigation as they coincide with a reduction in profitability measures. Deferred income tax adjustments consistently lead to more conservative estimates of earnings and equity, highlighting their material impact on financial statement presentation and interpretation.

The analysis of the annual financial data reveals several notable trends across the five-year period under review.

Net Income Trends

The reported net income attributable to common shareowners experienced significant fluctuations. Beginning with a substantial loss of 3,519 million US dollars in 2020, the figure recovered sharply to a positive 3,864 million in 2021 and continued to increase, peaking at 5,197 million in 2022. This was followed by a decline to 3,195 million in 2023, before rising again to 4,774 million in 2024. In comparison, the adjusted net income, which accounts for deferred income tax adjustments, similarly started with a loss of 3,618 million US dollars in 2020 and then showed a marked recovery in 2021 to 3,776 million. However, adjusted income values were generally lower than reported values from 2022 to 2023, indicating the impact of tax-related adjustments. The adjusted net income decreased year-over-year from 3,776 million in 2021 to 2,793 million in 2023 but rebounded strongly to 4,727 million in 2024.

Return on Assets (ROA) Patterns

Return on Assets metrics, both reported and adjusted, mirror the net income trends but at percentages reflecting profitability relative to assets. Reported ROA moved from a negative 2.17% in 2020 to positive territory at 2.39% in 2021, further increasing to 3.27% in 2022. This was followed by a decline to 1.97% in 2023 and a moderate recovery to 2.93% in 2024. Adjusted ROA similarly transformed from negative 2.23% in 2020 to 2.34% in 2021 but experienced a more pronounced decline over the next two years to 2.22% in 2022 and 1.73% in 2023 before rebounding to 2.9% in 2024.

Comparative Insights Between Reported and Adjusted Figures

The data reflects consistent patterns where adjusted net income and adjusted ROA are slightly lower than their reported counterparts in most years, particularly noticeable in the years 2022 and 2023. This suggests that deferred income tax adjustments have a moderating effect on profitability metrics during this period. The convergence of reported and adjusted figures in 2024 indicates a potential normalization or reduction in the impact of these adjustments.

Overall Observations

The company displayed a strong recovery from a significant loss in 2020 to positive and substantial profitability from 2021 onwards, although there was some volatility in the middle years. Both net income and ROA metrics peaked in 2022, followed by a dip in 2023 and a rebound in 2024. Adjusted results provide a more conservative view of profitability but largely follow the same trajectory as reported data, underscoring the influence of tax treatments on the reported financial outcomes.