RTX Corp. (NYSE:RTX)

The solvency position of the company exhibits fluctuating trends over the five-year period. Generally, leverage ratios increased through 2023 before decreasing slightly in the subsequent two years. Coverage ratios also demonstrate volatility, with a dip in 2023 followed by recovery.

Debt Ratios

Debt to equity, both with and without the inclusion of operating lease liabilities, increased notably from 2022 to 2023, rising from approximately 0.44 to 0.73 and 0.47 to 0.76 respectively. These ratios then decreased in 2024 and 2025, but remained above their 2021 and 2022 levels. A similar pattern is observed in debt to capital ratios, increasing to 0.42 and 0.43 in 2023 before declining to 0.37 and 0.38 in 2025. Debt to assets ratios followed the same trend, peaking at 0.27 and 0.28 in 2023 and receding to 0.22 and 0.23 by 2025. This suggests an initial increase in financial leverage followed by a partial deleveraging.

Leverage Ratio

Financial leverage increased from 2.21 in 2021 to 2.71 in 2023, indicating a greater reliance on debt financing. It then decreased slightly to 2.62 in 2025, but remained considerably higher than the levels seen in the earlier years of the period. This mirrors the trends observed in the debt ratios.

Coverage Ratios

Interest coverage decreased from 4.71 in 2021 to 3.32 in 2023, suggesting a reduced ability to meet interest obligations from earnings. However, it rebounded to 4.14 in 2024 and further improved to 5.76 in 2025, indicating a strengthening capacity to cover interest expenses. Fixed charge coverage exhibited a similar pattern, declining to 2.81 in 2023 before increasing to 3.59 in 2024 and 4.75 in 2025. The improvement in both coverage ratios in the later years suggests a strengthening ability to meet overall fixed financial obligations.

In summary, the company experienced a period of increased leverage in 2023, followed by a partial reduction in debt levels and an improvement in its ability to cover fixed charges and interest expenses in 2024 and 2025. While leverage remains higher than in 2021 and 2022, the positive trend in coverage ratios is encouraging.

The Debt-to-Equity ratio for the analyzed period demonstrates a notable shift in the company’s financial leverage. Initially stable, the ratio increased significantly before exhibiting a moderating trend.

Overall Trend

The Debt-to-Equity ratio began at 0.43 in 2021 and rose to a peak of 0.73 in 2023. Subsequently, the ratio decreased to 0.69 in 2024 and further to 0.58 in 2025. This indicates an initial increase in reliance on debt financing, followed by a reduction in that reliance.

Initial Stability (2021-2022)

From 2021 to 2022, the Debt-to-Equity ratio remained relatively consistent, moving from 0.43 to 0.44. This suggests a period of balanced capital structure maintenance, with debt and equity financing growing at similar rates.

Significant Increase (2022-2023)

A substantial increase in the ratio occurred between 2022 and 2023, rising from 0.44 to 0.73. This indicates a considerable increase in debt relative to equity during this period, potentially due to increased borrowing for expansion, acquisitions, or other strategic initiatives. The increase suggests a higher degree of financial risk.

Moderation (2023-2025)

Following the peak in 2023, the Debt-to-Equity ratio began to decline, reaching 0.69 in 2024 and 0.58 in 2025. This suggests a deliberate effort to reduce leverage, potentially through debt repayment, equity issuance, or improved profitability leading to increased retained earnings. The downward trend indicates a lessening of financial risk.

The fluctuations in the Debt-to-Equity ratio suggest dynamic shifts in the company’s financing strategy and capital structure. The increase in 2023 warrants further investigation to understand the underlying reasons, while the subsequent decrease indicates a positive adjustment towards a more balanced financial position.

The debt to equity ratio, including operating lease liabilities, exhibits a notable shift over the observed period. Initially stable, the ratio increased significantly before showing signs of moderation.

Debt to Equity Trend

In 2021 and 2022, the debt to equity ratio remained relatively consistent, at 0.46 and 0.47 respectively. This indicates a stable capital structure with a moderate level of financial leverage. However, 2023 witnessed a substantial increase to 0.76, suggesting a significant rise in debt relative to equity. This increase continued, albeit at a slower pace, to 0.72 in 2024. Subsequently, the ratio decreased to 0.61 in 2025, indicating a partial reversal of the increased leverage.

The increase in the debt to equity ratio from 2022 to 2023 warrants further investigation. While the ratio decreased in the subsequent two years, it remained elevated compared to the levels observed in 2021 and 2022. This suggests that the company may have undertaken significant debt-financed activities, potentially including acquisitions or substantial investments, during 2023. The subsequent reduction in the ratio in 2024 and 2025 could be attributed to factors such as increased profitability leading to higher retained earnings, or active debt reduction strategies.

Total Debt and Shareowners’ Equity

Total debt, including operating lease liability, increased from US$33,553 million in 2021 to US$45,587 million in 2023, contributing to the rise in the debt to equity ratio. It then decreased to US$39,956 million by 2025. Shareowners’ equity experienced a decline from US$73,068 million in 2021 to US$59,798 million in 2023, further exacerbating the increase in the ratio. Equity then showed a recovery, reaching US$65,245 million in 2025. The interplay between these two components significantly influenced the observed trend in the debt to equity ratio.

The observed fluctuations in both debt and equity levels are key drivers of the changes in the debt to equity ratio. Continued monitoring of these components is recommended to assess the company’s long-term financial health and capital structure management.

The Debt to Capital ratio exhibits a generally increasing trend from 2021 to 2023, followed by a slight decline in subsequent years. This indicates a shifting capital structure over the observed period.

Debt to Capital Ratio - Overall Trend

The ratio began at 0.30 in 2021 and increased to 0.42 in 2023, representing a 40% rise over the three-year period. This suggests an increasing reliance on debt financing relative to capital. The ratio then decreased to 0.41 in 2024 and further to 0.37 in 2025, indicating a modest reduction in leverage.

Debt to Capital Ratio - 2021-2023

From 2021 to 2022, the ratio experienced a slight increase from 0.30 to 0.31. The most significant change occurred between 2022 and 2023, with the ratio climbing from 0.31 to 0.42. This substantial increase suggests a considerable increase in debt levels or a decrease in total capital during this period.

Debt to Capital Ratio - 2023-2025

Following the peak in 2023, the ratio decreased modestly to 0.41 in 2024 and 0.37 in 2025. This suggests a potential effort to reduce debt or increase capital, although the decrease is less pronounced than the prior increase. The level in 2025 remains higher than the levels observed in 2021 and 2022.

The fluctuations in the Debt to Capital ratio warrant further investigation into the underlying drivers of these changes, including specific debt issuances, repayments, equity transactions, and retained earnings.

The Debt to Capital ratio, inclusive of operating lease liabilities, exhibits a fluctuating pattern over the five-year period. Initially, the ratio demonstrates a slight increase, followed by a more substantial rise, and then a subsequent decline.

Total Debt (including operating lease liability)

Total debt increased from US$33,553 million in 2021 to US$33,856 million in 2022, representing a modest increase. A significant increase is then observed, reaching US$45,587 million in 2023. This is followed by a decrease to US$43,260 million in 2024 and a further decrease to US$39,956 million in 2025.

Total Capital (including operating lease liability)

Total capital experienced a slight decrease from US$106,621 million in 2021 to US$106,488 million in 2022. A gradual decline continues through 2024, reaching US$103,416 million. A slight recovery is noted in 2025, with total capital increasing to US$105,201 million.

Debt to Capital Ratio

The Debt to Capital ratio increased from 0.31 in 2021 to 0.32 in 2022. A more pronounced increase is observed in 2023, reaching 0.43. The ratio then decreased to 0.42 in 2024 and further decreased to 0.38 in 2025. This suggests an initial increase in financial leverage, peaking in 2023, followed by a reduction in leverage in the subsequent two years.

The most significant change is the increase in the Debt to Capital ratio in 2023, indicating a greater reliance on debt financing relative to capital. The subsequent decreases in 2024 and 2025 suggest a potential shift towards reducing debt or increasing equity, or a combination of both. The fluctuations in both total debt and total capital contribute to the observed trend in the ratio.

The Debt-to-Assets ratio exhibits fluctuations over the observed five-year period. Initially stable, the ratio increased significantly before declining again, suggesting shifts in the company’s financial leverage.

Debt-to-Assets Ratio Trend

The ratio remained consistent at 0.20 in both 2021 and 2022, indicating a stable level of debt financing relative to the company’s asset base. A notable increase occurred in 2023, with the ratio rising to 0.27. This signifies a greater reliance on debt to finance assets. Subsequently, the ratio decreased to 0.25 in 2024 and further to 0.22 in 2025, suggesting a reduction in financial leverage during these periods.

Magnitude of Change

The largest single-year change was observed between 2022 and 2023, with an increase of 0.07. The decrease from 2024 to 2025 was smaller, at 0.03. These changes suggest that the company’s debt management strategy has evolved over time, potentially in response to changing economic conditions or internal investment decisions.

Overall Assessment

The observed trend indicates a period of increased debt financing followed by a deliberate effort to reduce leverage. The ratio in 2025, at 0.22, represents a return towards the levels seen in the earlier years of the period, though still higher than the initial values. This suggests a potential recalibration of the company’s capital structure.

The Debt to Assets ratio, including operating lease liability, exhibits fluctuations over the five-year period. Initially stable, the ratio increased significantly before decreasing again, suggesting shifts in the company’s financial leverage.

Overall Trend

The ratio remained consistent at 0.21 in both 2021 and 2022. A notable increase occurred in 2023, rising to 0.28, indicating a higher proportion of assets financed by debt. This was followed by a decrease to 0.27 in 2024 and a further decline to 0.23 in 2025. This recent downward trend suggests a reduction in financial leverage.

Debt Levels

Total debt, including operating lease liability, increased from US$33,553 million in 2021 to US$33,856 million in 2022, remaining relatively flat. A substantial increase was then observed in 2023, reaching US$45,587 million. Subsequently, debt decreased to US$43,260 million in 2024 and further to US$39,956 million in 2025.

Asset Levels

Total assets experienced a slight decrease from US$161,404 million in 2021 to US$158,864 million in 2022. Assets then increased to US$161,869 million in 2023, US$162,861 million in 2024, and continued to rise to US$171,079 million in 2025. The growth in assets during the latter part of the period likely contributed to the decreasing Debt to Assets ratio.

The increase in the ratio in 2023, coupled with the subsequent decline, warrants further investigation to understand the underlying drivers of these changes. The decrease in the ratio in 2024 and 2025 suggests improved solvency, as the proportion of debt relative to assets has diminished.

The financial leverage of the company, as measured by the ratio of total assets to shareowners’ equity, exhibits an increasing trend over the observed period. While initially stable, the ratio demonstrates a notable rise in later years, indicating a growing reliance on debt financing relative to equity.

Overall Trend

The financial leverage ratio began at 2.21 in 2021 and remained relatively consistent at 2.19 in 2022. A significant increase is then observed, reaching 2.71 in 2023 and holding steady at the same level in 2024. The ratio experiences a slight decrease to 2.62 in 2025, though it remains substantially higher than the initial values.

Shareowners’ Equity Impact

The increase in financial leverage is not solely driven by changes in total assets. Shareowners’ equity decreased from US$73,068 million in 2021 to US$59,798 million in 2023, contributing to the higher leverage ratio. While equity recovers somewhat in 2024 and 2025, reaching US$65,245 million, it does not fully offset the earlier decline.

Total Assets Impact

Total assets show a modest overall increase throughout the period, moving from US$161,404 million in 2021 to US$171,079 million in 2025. However, the growth in assets is less pronounced than the fluctuations in shareowners’ equity, and therefore plays a secondary role in the observed changes in financial leverage.

Implications

The rising financial leverage suggests the company is utilizing more debt to finance its assets. While this can amplify returns during profitable periods, it also increases financial risk and vulnerability to economic downturns. The slight decrease in leverage in 2025 may indicate a deliberate effort to moderate debt levels, but the ratio remains elevated compared to earlier years.

The analysis reveals fluctuations in the company’s ability to meet its interest obligations over the five-year period. Earnings before interest and tax (EBIT) and interest expense both exhibit variability, impacting the interest coverage ratio accordingly.

Overall Trend

The interest coverage ratio demonstrates an initial improvement followed by a decline and subsequent recovery. The ratio began at 4.71 in 2021, increased to a peak of 5.64 in 2022, then decreased significantly to 3.32 in 2023. A subsequent increase to 4.14 in 2024 and further to 5.76 in 2025 indicates a strengthening ability to cover interest expenses.

EBIT Performance

EBIT increased from US$6,261 million in 2021 to US$7,327 million in 2022, contributing to the improved interest coverage. However, EBIT then decreased to US$5,489 million in 2023, coinciding with the lowest interest coverage ratio during the period. The subsequent increases in EBIT to US$8,164 million in 2024 and US$10,568 million in 2025 align with the recovery in the interest coverage ratio.

Interest Expense

Interest expense remained relatively stable between 2021 and 2023, fluctuating between US$1,300 million and US$1,653 million. A noticeable increase to US$1,970 million in 2024, despite the increase in EBIT, partially offset the improvement in interest coverage. Interest expense decreased slightly to US$1,835 million in 2025, further supporting the ratio’s increase.

The decline in interest coverage in 2023 warrants attention, as it indicates a reduced margin of safety for meeting interest obligations. However, the subsequent recovery in 2024 and 2025, driven by increased earnings, suggests improved solvency. The interplay between EBIT and interest expense is a key driver of the observed trends in the interest coverage ratio.

The company’s fixed charge coverage exhibited fluctuations over the five-year period. Earnings before fixed charges and tax, and fixed charges themselves, both experienced changes impacting the overall coverage ratio.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax increased from US$6,786 million in 2021 to US$7,802 million in 2022, representing a positive trend. However, a decrease was observed in 2023, falling to US$5,952 million. This was followed by a recovery in 2024, reaching US$8,586 million, and continued growth in 2025 to US$11,063 million. The most substantial year-over-year increase occurred between 2024 and 2025.

Fixed Charges

Fixed charges decreased slightly from US$1,855 million in 2021 to US$1,775 million in 2022. An increase was then noted in 2023, rising to US$2,116 million, and continued into 2024 with a value of US$2,392 million. Fixed charges experienced a modest decrease in 2025, settling at US$2,330 million.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio began at 3.66 in 2021 and improved to 4.40 in 2022, indicating a stronger ability to meet fixed obligations. A significant decline was observed in 2023, with the ratio falling to 2.81. The ratio recovered to 3.59 in 2024, and further improved substantially in 2025, reaching 4.75. This final value represents the highest ratio observed during the analyzed period, suggesting a strengthened capacity to cover fixed charges.

The fluctuations in the fixed charge coverage ratio largely correspond to the changes in earnings before fixed charges and tax. While fixed charges generally increased over the period, the larger swings in earnings had a more pronounced effect on the coverage ratio. The substantial increase in earnings in 2025 contributed to the highest coverage ratio observed, indicating improved financial flexibility.