RTX Corp. (NYSE:RTX)

The financial ratios over the five-year period demonstrate notable trends in leverage and coverage measures.

Debt to Equity

The debt to equity ratio remained relatively stable around 0.44 from 2020 to 2022, then increased significantly to 0.73 in 2023, slightly declining to 0.69 in 2024. Including operating lease liabilities, the trend is similar, with a slight increase in leverage from 0.47-0.47 during 2020-2022 to 0.76 in 2023 and 0.72 in 2024.

Debt to Capital

This ratio showed stability around 0.30-0.31 in the first three years, followed by an increase to 0.42 in 2023 and a slight decrease to 0.41 in 2024. The inclusion of operating lease liabilities slightly elevates these ratios but follows the same trend.

Debt to Assets

The debt to assets ratio remained unchanged at 0.20-0.21 during 2020-2022 but increased to 0.27-0.28 in 2023, settling at 0.25-0.27 in 2024. This indicates a growing proportion of assets financed by debt over time.

Financial Leverage

Financial leverage consistently decreased slightly from 2.25 in 2020 to 2.19 in 2022, then surged to 2.71 in 2023, maintaining this level in 2024. This shift indicates an increased reliance on debt financing relative to equity.

Interest Coverage

Interest coverage was negative at -0.65 in 2020, indicating insufficient earnings to cover interest expenses initially. It improved substantially to 4.71 in 2021 and peaked at 5.64 in 2022 before declining to 3.32 in 2023 and recovering somewhat to 4.14 in 2024. This pattern reflects fluctuations in operational profitability relative to interest obligations.

Fixed Charge Coverage

Mirroring interest coverage, fixed charge coverage was negative at -0.22 in 2020, improved to 3.66 in 2021, rose to 4.40 in 2022, then declined to 2.81 in 2023 before rebounding to 3.59 in 2024. This suggests variability in the ability to meet fixed financial obligations other than interest.

Overall, the data indicates a marked increase in leverage metrics starting in 2023, suggesting a strategic shift toward higher debt financing. Concurrently, coverage ratios, though improving significantly after 2020, showed some volatility, particularly with declines in 2023, possibly reflecting operational challenges or increased interest burdens related to higher debt levels. The recovery in 2024 coverage ratios hints at strengthening earnings relative to fixed charges. These dynamics suggest that while leverage increased, the company maintained a reasonable ability to cover its financial obligations despite some fluctuations.

The financial data over the five-year period indicates notable shifts in the capital structure of the company. The following analysis highlights key trends and insights based on the reported figures for total debt, shareowners' equity, and the debt-to-equity ratio.

Total Debt

Total debt was relatively stable from 2020 through 2022, fluctuating slightly around the $31.8 billion mark. However, a significant increase occurred in 2023, with the debt rising sharply to $43.8 billion before declining modestly to $41.3 billion in 2024. This surge suggests a considerable increase in leverage or financing activities during this period.

Shareowners' Equity

Equity remained fairly consistent between 2020 and 2022, maintaining a level near $72 billion. In 2023, there was a pronounced decrease to approximately $59.8 billion, with a slight recovery to $60.2 billion in 2024. The drop implies either adverse changes in retained earnings, possible losses, dividend distributions, or other equity-reducing events.

Debt-to-Equity Ratio

The debt-to-equity ratio reflected the relative movements of debt and equity. It stayed steady at roughly 0.44 from 2020 through 2022, consistent with the stable levels of debt and equity. A considerable jump occurred in 2023, rising to 0.73, coinciding with the debt increase and equity decrease. The ratio slightly improved to 0.69 in 2024 but remained significantly elevated compared to prior years. This indicates increased reliance on debt financing relative to equity, potentially elevating financial risk.

In summary, the company experienced a stable financial position in its capital structure until 2022, followed by marked changes in 2023 and 2024. The surge in total debt combined with the contraction in equity led to a substantial increase in leverage, as evidenced by the higher debt-to-equity ratio. This trend suggests a strategic shift towards increased borrowing, which warrants careful monitoring regarding impact on financial flexibility and risk profile.

Total Debt (Including Operating Lease Liability)

The total debt remained fairly stable from 2020 to 2022, with values fluctuating slightly between approximately 33,500 and 33,800 million US dollars. However, there was a significant increase in 2023, reaching around 45,587 million US dollars, followed by a slight decrease in 2024 to approximately 43,260 million US dollars.

Shareowners’ Equity

Shareowners’ equity showed a modest upward movement from 2020 through 2022, rising from about 72,163 million US dollars to 72,632 million US dollars. This positive trend reversed sharply in 2023, dropping to 59,798 million US dollars, and then showed a minor recovery in 2024, reaching 60,156 million US dollars.

Debt to Equity Ratio (Including Operating Lease Liability)

The debt to equity ratio was relatively stable and low from 2020 to 2022, remaining around 0.46 to 0.47. In 2023, the ratio increased significantly to 0.76, indicating higher leverage, before decreasing slightly in 2024 to 0.72. This change reflects the impact of increased debt and reduced equity in those years.

Overall Analysis

There is a clear indication of increased financial leverage starting in 2023, marked by a substantial rise in total debt and a concurrent decline in shareowners’ equity. This leverage increase is evidenced by the debt to equity ratio, which rose sharply in 2023 and remained elevated in 2024 compared to prior years. The period from 2020 to 2022 was marked by relative financial stability, with stable debt levels and gradually increasing equity. The recent trends suggest either increased borrowing or restructuring that led to higher liabilities and reduced equity base, potentially signaling a shift in financial strategy or response to external pressures.

Total debt

The total debt remained relatively stable from 2020 to 2022, fluctuating slightly around the 31,000 million US dollar mark. However, there was a notable increase in 2023, rising sharply to 43,827 million US dollars. In 2024, the total debt decreased somewhat but remained elevated at 41,261 million US dollars compared to the earlier years.

Total capital

Total capital exhibited minor variation over the five-year period, starting at approximately 103,986 million US dollars in 2020 and maintaining a similar level through 2022. There was a slight decline in 2023 and further reduction in 2024, resulting in a total capital of 101,417 million US dollars by the end of the period under review.

Debt to capital ratio

The debt to capital ratio indicated a stable leverage position from 2020 through 2022, remaining close to 0.30–0.31. In 2023, this ratio increased sharply to 0.42, reflecting the significant rise in total debt combined with a slight reduction in total capital. The ratio decreased marginally to 0.41 in 2024, remaining substantially higher than the earlier years, which suggests increased leverage and potentially higher financial risk during the recent period.

Total Debt (including operating lease liability)

The total debt of the company remained relatively stable between 2020 and 2022, fluctuating slightly around the 33,500 US$ million mark. However, there was a significant increase in 2023, where total debt rose sharply to 45,587 US$ million. In 2024, total debt decreased modestly but remained elevated at 43,260 US$ million compared to the earlier years.

Total Capital (including operating lease liability)

The total capital displayed a marginal declining trend over the five-year period. Starting at 105,984 US$ million in 2020, it stayed fairly consistent through 2021 and 2022, then exhibited a gradual decrease in 2023 and 2024, ending at 103,416 US$ million. This suggests a slight contraction in the capital base.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio mirrored the changes observed in total debt. It was stable around 0.31 to 0.32 from 2020 to 2022, indicating a consistent leverage level. In 2023, the ratio increased sharply to 0.43, reflecting the substantial rise in total debt relative to capital. In 2024, the ratio slightly declined to 0.42, but remained significantly higher than the earlier years.

Overall, the data indicates that while the company's capital base has slightly contracted over the period, it increased its leverage substantially in 2023, maintaining a higher debt level into 2024. This rise in financial leverage suggests increased reliance on debt financing relative to capital, which may warrant close monitoring of debt servicing capacity and financial risk going forward.

The financial data reveals several key trends regarding the company's debt levels, asset base, and leverage ratios over the five-year period from 2020 to 2024.

Total Debt

The total debt remained relatively stable between 2020 and 2022, fluctuating slightly around the US$31.8 billion mark. However, a significant increase occurred in 2023, with debt rising sharply to approximately US$43.8 billion. This elevated debt level slightly decreased in 2024 to about US$41.3 billion, though it remained substantially higher than the earlier years.

Total Assets

Total assets showed a marginal decline from US$162.2 billion in 2020 to US$158.9 billion in 2022, reflecting a slight contraction in the asset base. This trend reversed in 2023 and 2024, where total assets increased modestly to about US$161.9 billion and US$162.9 billion respectively, reaching levels close to those in 2020.

Debt to Assets Ratio

The debt to assets ratio was steady at 0.2 from 2020 to 2022, indicating consistent leverage levels during these years. The ratio increased notably in 2023 to 0.27, correlating with the sizeable rise in total debt. By 2024, the ratio slightly decreased to 0.25 but remained elevated compared to the initial years, suggesting a higher leverage position than that observed from 2020 to 2022.

Overall, the data indicates that the company took on considerably more debt beginning in 2023, leading to an increase in financial leverage. Despite this, the total asset base showed resiliency, recovering after a slight decline. The increase in leverage could imply greater financial risk, although the asset growth partially offsets this by providing a somewhat stronger asset cushion. Continuous monitoring of debt levels and asset growth will be essential to assess the sustainability of this leverage increase going forward.

Total Debt (Including Operating Lease Liability)

The total debt level remained relatively stable between 2020 and 2022, fluctuating slightly around the 33,800 million US dollar mark. However, there was a significant increase in 2023, with total debt rising sharply to approximately 45,587 million US dollars. This elevated level slightly decreased in 2024 but remained substantially higher than in the earlier years, at around 43,260 million US dollars.

Total Assets

Total assets showed minor fluctuations over the five-year period, beginning at approximately 162,153 million US dollars in 2020 and decreasing slightly to 158,864 million US dollars in 2022. Following this dip, total assets gradually recovered, reaching 162,861 million US dollars by 2024, a level very close to the initial figure observed in 2020.

Debt to Assets Ratio (Including Operating Lease Liability)

This ratio remained steady at 0.21 from 2020 through 2022, indicating that debt was consistently around 21% of total assets during those years. With the sharp increase in total debt in 2023, the debt-to-assets ratio increased correspondingly to 0.28, indicating a higher leverage level. By 2024, this ratio decreased slightly to 0.27 but remained elevated compared to the earlier stable periods.

Total assets

Total assets exhibited a relatively stable trend over the five-year period, starting at 162,153 million US dollars in 2020 and experiencing slight fluctuations, with a minor decrease to 158,864 million in 2022. Subsequently, total assets increased modestly to 162,861 million by 2024, closely aligning with the initial value in 2020. This suggests overall asset base consistency with minor variances year over year.

Shareowners’ equity

Shareowners’ equity showed a slight upward trend from 72,163 million US dollars in 2020, reaching a peak of 73,068 million in 2021. However, it then exhibited a minor decline to 72,632 million in 2022, followed by a significant reduction in 2023 to 59,798 million. A slight recovery occurred in 2024 with equity increasing marginally to 60,156 million. The sharp drop between 2022 and 2023 highlights a notable change in the company's equity position during this period.

Financial leverage

The financial leverage ratio decreased slightly from 2.25 in 2020 to 2.19 in 2022, indicating a modest reduction in reliance on debt relative to equity during these years. However, a pronounced increase occurred in 2023, with the ratio rising substantially to 2.71 and maintaining this elevated level in 2024. This upward shift suggests increased leverage, implying that the company took on more debt compared to equity starting in 2023.

Earnings Before Interest and Tax (EBIT)

The EBIT shows a significant positive turnaround over the analyzed period. Initially, in 2020, the EBIT was negative at -923 million USD, indicating an operating loss. However, from 2021 onwards, there is a major improvement with EBIT rising sharply to 6261 million USD and further increasing to 7327 million USD in 2022. This is followed by a decline in 2023 to 5489 million USD, before increasing again in 2024 to 8164 million USD. Overall, there is a strong upward trend suggesting improved operational profitability, although there is some volatility particularly with the noticeable dip in 2023.

Interest Expense

Interest expense exhibits a generally upward trend over the period under review. Starting at 1430 million USD in 2020, it decreases slightly to 1330 million USD in 2021 and continues a minor reduction to 1300 million USD in 2022. From 2023, the interest expense rises noticeably to 1653 million USD, and this upward trajectory continues into 2024 reaching 1970 million USD. This increase in interest expense in the latter years could imply higher debt levels or increased borrowing costs.

Interest Coverage Ratio

The interest coverage ratio, which measures the ability to meet interest obligations from operating earnings, mirrors changes in EBIT and interest expense. The ratio starts in negative territory at -0.65 in 2020 due to the negative EBIT, indicating inability to cover interest expenses. It improves markedly in 2021 to 4.71 and further increases in 2022 to 5.64, reflecting strong coverage capacity. However, there is a decline in 2023 to 3.32, driven by both reduced EBIT and increased interest expense. In 2024, the ratio recovers to 4.14, though it does not reach the 2022 level. Overall, the company maintains a reasonable ability to meet interest payments throughout most of the period, with some diminished coverage in 2023.

The financial data reveals notable fluctuations in earnings before fixed charges and tax over the analyzed period. After a significant loss in 2020, with negative earnings of -426 million US dollars, the company experienced a strong turnaround in 2021, achieving earnings of 6,786 million US dollars. This upward trend continued in 2022, reaching 7,802 million US dollars. However, there was a decline in 2023 to 5,952 million US dollars, before recovering again to 8,586 million US dollars in 2024.

Fixed charges show a different pattern, gradually decreasing from 1,927 million US dollars in 2020 to 1,775 million in 2022, before increasing to 2,116 million in 2023 and further to 2,392 million in 2024. This suggests a period of cost reduction followed by increased fixed charges in the most recent years.

Fixed Charge Coverage Ratio

The coverage ratio provides insight into the company's ability to meet fixed charges from its earnings before fixed charges and tax. The ratio was negative in 2020 at -0.22, reflecting the loss incurred and inability to cover fixed charges. It improved substantially to 3.66 in 2021 and reached a peak of 4.4 in 2022, indicating solid coverage capability.

Subsequently, the ratio declined to 2.81 in 2023, which may imply reduced earnings relative to fixed charges or increased fixed charges, before improving again to 3.59 in 2024. Despite some volatility, the ratio remains above 1 in recent years, suggesting an overall capacity to comfortably cover fixed charges.

Overall, the data suggests the company recovered strongly from a challenging 2020, with earnings growth and improved fixed charge coverage in subsequent years. While fixed charges rose toward the end of the period, earnings growth has generally outpaced these increases, maintaining a healthy margin of coverage despite some year-to-year variations.