RTX Corp. (NYSE:RTX)

The financial data reflects several key trends related to profitability, capital costs, invested capital, and economic profit over the five-year period from 2020 to 2024.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a significant recovery and growth trend from 2020 through 2024. Initially, in 2020, NOPAT shows a substantial negative value of -1590 million US dollars, indicating operational losses after taxes during that year. However, in 2021, there is a marked improvement, with NOPAT turning positive at 5054 million US dollars. Although there is a slight decline in 2022 and 2023, with values at 4663 and 4118 million respectively, the upward trend resumes sharply in 2024, reaching 6483 million. This pattern suggests operational efficiency gains and enhanced profitability over the period.

Cost of Capital

The cost of capital has experienced a modest but consistent upward trend, rising from 6.52% in 2020 to 6.93% in 2024. This gradual increase might reflect changing market conditions or company-specific risk adjustments. The fluctuations in cost of capital are relatively minor, indicating a stable but slightly increasing capital expense environment.

Invested Capital

Invested capital has shown a steady decline across the period, decreasing from 115,597 million US dollars in 2020 to 111,328 million US dollars in 2024. This downward trend, amounting to a reduction of approximately 3.7%, suggests a reduction in capital investment or asset base, which could result from divestitures, asset optimization, or controlling capital expenditure.

Economic Profit

Economic profit remains negative throughout the entire period, although the deficit improves significantly from -9123 million US dollars in 2020 to -1237 million in 2024. Despite all years reporting economic losses, the narrowing loss suggests that the company is approaching the breakeven point on an economic profit basis. The persistent negative economic profit implies that the returns generated have not fully compensated the cost of capital, but the smaller loss in 2024 compared to prior years indicates progressing financial performance.

Overall, the data indicates improving operational profitability and a modestly increasing cost of capital, coupled with a decrease in invested capital. While economic profit remains negative, the company is trending toward improved value creation, with lessening economic losses indicative of better capital efficiency and stronger earnings generation over time.

Net Income (Loss) Attributable to Common Shareowners

The data reveals a significant turnaround in net income over the five-year span. Starting with a substantial loss of $3,519 million in 2020, the company moved to positive net income in 2021, earning $3,864 million. This positive trajectory continued with net income increasing to $5,197 million in 2022. However, there was a notable decline in 2023, with net income dropping to $3,195 million. The year 2024 saw a substantial recovery, with net income rising again to $4,774 million. Overall, the trend shows strong volatility but an underlying recovery and growth following initial losses.

Net Operating Profit After Taxes (NOPAT)

NOPAT also exhibits considerable improvement from 2020 through 2024. It started in negative territory at -$1,590 million in 2020, then sharply increased to $5,054 million in 2021. A slight decrease occurred in 2022, with NOPAT falling to $4,663 million, followed by a further decline to $4,118 million in 2023. In 2024, there was a substantial increase to $6,483 million, marking the highest point during the observed period. This suggests strong operating performance recovery and improved profitability post-2020.

General Observations

Both net income and NOPAT reveal a pattern of initial recovery after a period of losses, with some fluctuations between 2022 and 2023. The company demonstrates resilience with net income and operating profit growing significantly from 2020 lows to much higher figures by 2024. The decline in 2023 warrants attention as it interrupts the otherwise upward trend, but the subsequent recovery indicates an overall positive financial health trajectory.

Income Tax Expense

The income tax expense exhibits variability over the analyzed five-year period. Starting at 575 million US dollars in 2020, it increased notably to 786 million in 2021. However, in 2022, it declined to 700 million before experiencing a further reduction to 456 million in 2023. In 2024, a significant rise to 1181 million occurred, marking the highest level in the period. The fluctuation suggests the influence of changing taxable income, tax rates, or tax planning strategies impacting reported tax expenses.

Cash Operating Taxes

Cash operating taxes show a generally upward trend with some volatility. Beginning at 978 million US dollars in 2020, this figure increased to 1158 million in 2021. A sharp and substantial increase to 2635 million is seen in 2022, more than doubling the previous year’s amount. This peak was followed by a considerable decline to 1197 million in 2023. In 2024, cash operating taxes rose again to 1638 million. This pattern indicates significant fluctuations in actual cash tax payments, potentially reflecting changes in tax regulations, timing of tax payments, or differences between accounting tax expense and cash tax outflows.

Total Reported Debt & Leases

The total reported debt and leases remained relatively stable from 2020 through 2022, with values around 33,800 million US dollars. However, a notable increase occurred in 2023, where the amount rose sharply to 45,587 million US dollars. This increase was followed by a slight decline in 2024 to 43,260 million US dollars, yet still remaining substantially higher than the levels observed in the initial years.

Shareowners’ Equity

Shareowners’ equity showed a slight upward trend from 2020 to 2021, reaching 73,068 million US dollars. It then experienced a minor decrease in 2022, followed by a significant reduction in 2023 to 59,798 million US dollars. In 2024, the equity levels stabilized modestly with a small increase to 60,156 million US dollars, but overall, the equity remained below the earlier period’s highs.

Invested Capital

Invested capital demonstrated a gradual decline over the entire period. From 115,597 million US dollars in 2020, it decreased steadily each year to reach 111,328 million US dollars by 2024. This consistent downward trend suggests a contraction in the company's invested assets or capital base over this timeframe.

Economic Profit

The economic profit demonstrates a significant improvement trend over the five-year period. Starting from a substantial negative value of -9123 million US dollars in 2020, the loss narrows considerably to -1237 million US dollars by 2024. Although the company remains in an economic loss position each year, the magnitude of the deficit has progressively decreased, indicating a gradual recovery or better utilization of invested capital in generating returns above cost.

Invested Capital

Invested capital shows a slow but steady decline throughout the period. It decreases annually from 115,597 million US dollars in 2020 to 111,328 million US dollars in 2024. This contraction suggests a slight reduction in the asset base or capital employed, which could imply strategic trimming of investments, disposal of assets, or optimization aimed at enhancing capital efficiency.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and cost of capital, remains negative during the entire timeframe but moves closer to zero. From an initial -7.89% in 2020, it improves to -1.11% by 2024. This positive shift reflects a decreasing gap between returns and costs, indicating that the company is progressively reducing its economic losses, although it has not yet achieved a positive spread. The improvement aligns with the reducing economic losses observed.

Economic Profit

The economic profit shows a consistent negative trend across all years, indicating that the company has been operating at an economic loss throughout the period. Although the losses remain significant, there is a noticeable improvement from 2020 through 2024. In 2020, the economic profit was -9123 million US dollars, which improved substantially to -1237 million US dollars by 2024. This suggests that although the company is still not generating economic profit, it has been able to reduce its economic losses over time.

Net Sales

Net sales demonstrate a steady upward trend from 2020 to 2024. Starting at 56,587 million US dollars in 2020, sales increased each year to reach 80,738 million US dollars in 2024. This represents a significant growth in revenue, indicating effective sales performance and possibly expansion or increased demand over the period.

Economic Profit Margin

The economic profit margin, expressed as a percentage, mirrors the trend seen in economic profit. The margin remains negative throughout the timeline but shows improvement from -16.12% in 2020 to -1.53% in 2024. This narrowing negative margin reflects better economic efficiency and profitability relative to sales, although the company has not yet turned positive in terms of economic profit margin.

Summary

The overall financial performance indicates that while the company has continuously increased its net sales, it has struggled to convert this top-line growth into positive economic profit. However, the persistent reduction in economic losses and improvement in economic profit margin signal progress toward achieving economic profitability. Continued focus on managing costs and improving operational efficiency will be necessary to transition from economic loss to economic profit.