RTX Corp. (NYSE:RTX)

Inventory Turnover

The inventory turnover ratio demonstrated some fluctuation over the five-year period, starting at 5.11 in 2020 and increasing to 5.65 in 2021. It then declined to 5.03 in 2022 and 4.83 in 2023 before recovering slightly to 5.12 in 2024. This suggests some variability in how quickly inventory is sold and replaced, with a dip in efficiency noticeable during 2022 and 2023.

Receivables Turnover

Receivables turnover showed a generally positive trend with an increase from 6.11 in 2020 to 7.36 in both 2022 and 2024. A slight dip was observed in 2023 where the ratio fell to 6.36. This indicates improved efficiency in the collection of receivables over the years despite the temporary setback in 2023.

Payables Turnover

Payables turnover declined steadily from 5.56 in 2020 to 5.07 in 2024. The downward trend indicates that the company is taking longer to pay its suppliers over time, which could reflect changes in payment terms or cash management strategies.

Working Capital Turnover

There was a significant upward trend in working capital turnover, increasing from 7.52 in 2020 to a peak of 41.62 in 2023. However, data for 2024 is missing. The sharp rise between 2021 and 2023 suggests a much more efficient use of working capital to generate sales, which could reflect improved operational efficiency or cost management during this period.

Average Inventory Processing Period

The average inventory processing period decreased from 71 days in 2020 to a low of 65 days in 2021, then increased to 76 days in 2023 before returning to 71 days in 2024. This variability aligns with the fluctuations seen in inventory turnover, indicating changes in how long inventory remains before being sold.

Average Receivable Collection Period

The average receivable collection period showed improvement, dropping from 60 days in 2020 to 50 days in 2022 and 2024, despite a slight increase to 57 days in 2023. The general trend indicates enhanced efficiency in collecting outstanding receivables over the period.

Operating Cycle

The operating cycle, representing the total days for the company to turn its inventory into cash, fluctuated moderately between 120 and 133 days over the years. It started at 131 days in 2020, reached a low of 120 days in 2021, increased to 133 days in 2023, and then decreased again to 121 days in 2024. This reflects some variability in operational efficiency.

Average Payables Payment Period

There was a gradual increase in the average payables payment period, from 66 days in 2020 to 72 days in 2024. This trend indicates that the company is taking longer to pay its suppliers, which might be a strategic approach to improve cash flow or negotiate extended payment terms.

Cash Conversion Cycle

The cash conversion cycle declined overall, moving from 65 days in 2020 down to 49 days in 2024, with some fluctuations in between. This reduction suggests enhanced efficiency in managing the time between cash outflows and inflows, improving liquidity and working capital management.

Cost of Sales

The cost of sales has exhibited a consistent upward trend over the five-year period. Starting at 48,056 million US dollars in 2020, it increased to 51,897 million in 2021, 53,406 million in 2022, and further to 56,831 million in 2023, reaching 65,328 million in 2024. This steady rise indicates growing operational activity or increased input costs, reflecting either expansion or inflationary pressures impacting production expenses.

Inventory, Net

Net inventory values demonstrate a generally increasing trend with some fluctuation. Beginning at 9,411 million US dollars in 2020, inventory levels slightly decreased to 9,178 million in 2021 but then rose noticeably to 10,617 million in 2022. This upward trajectory continued with inventories reaching 11,777 million in 2023 and 12,768 million in 2024. The increase suggests greater stockholding possibly due to scaling operations or anticipation of higher sales volume, though the dip in 2021 may reflect efforts to streamline inventory.

Inventory Turnover

The inventory turnover ratio, indicating the efficiency of inventory management, fluctuated over the years but remained within a relatively narrow band. It improved from 5.11 in 2020 to 5.65 in 2021, reflecting more efficient inventory utilization during that year. However, turnover slowed to 5.03 in 2022 and further to 4.83 in 2023, signaling reduced inventory efficiency potentially due to accumulation of stock or slower sales. By 2024, it rebounded to 5.12, indicating a recovery in inventory management effectiveness.

The analysis of the financial data for RTX Corp. over the five-year period ending in 2024 reveals several notable trends and changes.

Net Sales

There is a consistent upward trend in net sales from 2020 through 2024. Starting at US$56,587 million in 2020, net sales increased annually, reaching US$80,738 million by the end of 2024. This represents a significant growth, indicating expanding business operations or increased market demand over the period.

Accounts Receivable, Net

The accounts receivable balance shows some fluctuation but generally trends upward. It increased from US$9,254 million in 2020 to US$10,976 million in 2024. Notably, there was a dip in 2022 to US$9,108 million followed by a subsequent increase, suggesting potential variations in credit policy or collection efficiency during these years.

Receivables Turnover Ratio

The receivables turnover ratio, which measures the efficiency in collecting receivables, exhibited variability. It rose from 6.11 in 2020 to a peak of 7.36 in 2022, then decreased to 6.36 in 2023 before returning to 7.36 in 2024. The fluctuations indicate changing effectiveness in receivables collection, with 2023 representing a period of reduced collection efficiency or longer credit terms, followed by an improvement in the subsequent year.

Overall, the company’s sales growth is strong and consistent, yet the accounts receivable and turnover ratio suggest that management's effectiveness in managing receivables has varied, with some periods of less efficient collection activity. This could impact cash flow despite growing sales.

The analysis of the financial data reveals several notable trends and insights over the five-year period ending December 31, 2024.

Cost of Sales

The cost of sales has shown a consistent upward trend throughout the period. Beginning at US$48,056 million in 2020, it increased each year to reach US$65,328 million in 2024. The growth appears to accelerate particularly between 2023 and 2024, indicating increasing production or procurement expenses possibly due to higher sales volume, inflationary pressures, or increased input costs.

Accounts Payable

Accounts payable also increased steadily from US$8,639 million in 2020 to US$12,897 million in 2024. This rise closely follows the upward trend in cost of sales, reflecting extended credit terms or increased purchasing activities. The increase year over year suggests the company is relying more on vendor financing or has higher outstanding obligations to suppliers.

Payables Turnover Ratio

The payables turnover ratio, which measures how many times payables are paid off in a year, exhibits a declining trend from 5.56 in 2020 to 5.07 in 2024. This decrease indicates the company is taking longer to pay its suppliers. While still above 5 times per year, the downward trajectory may reflect changes in payment policies or cash flow management strategies prioritizing liquidity preservation.

Overall, the data suggests increased scale of operations as evidenced by higher cost of sales and accounts payable balances. The declining payables turnover ratio points to a more extended payment cycle, which may warrant monitoring to avoid potential supplier relationship issues. The combined trends imply a growing business footprint with evolving working capital management practices.

The financial data over the five-year period exhibits notable trends in working capital, net sales, and working capital turnover, which provide insight into the company’s operational efficiency and financial management.

Working Capital

Working capital has shown a consistent downward trend from US$7,528 million at the end of 2020 to a negative value of US$-366 million by the end of 2024. This decline indicates a significant depletion of current assets relative to current liabilities over the period, suggesting either an increase in short-term obligations or a reduction in liquid assets. The negative working capital at the end of 2024 may pose liquidity concerns if it continues, potentially impacting the company's ability to meet short-term obligations.

Net Sales

Net sales have steadily increased from US$56,587 million in 2020 to US$80,738 million in 2024. This growth reflects expanding revenue generation and possibly increased market demand or improved sales effectiveness. The rise in sales is substantial, with an overall increase of approximately 42.6% over the five years, signaling robust top-line growth despite challenges in working capital management.

Working Capital Turnover

The working capital turnover ratio has exhibited an upward trajectory, escalating from 7.52 in 2020 to 41.62 by the end of 2023. This ratio measures the efficiency with which working capital is used to generate sales; its increase implies that the company is generating more sales revenue per unit of working capital employed. However, the absence of data for 2024 makes it impossible to ascertain whether this trend continued. The sharp increase in turnover ratio is largely driven by the decreasing working capital alongside rising sales, which, while indicative of improved efficiency, may also reflect tighter working capital constraints.

Inventory turnover

The inventory turnover ratio demonstrates a fluctuating pattern over the five-year period. It increased from 5.11 in 2020 to 5.65 in 2021, indicating an improvement in inventory efficiency. However, the ratio then declined to 5.03 in 2022 and further to 4.83 in 2023, suggesting a slowdown in inventory movement. In 2024, the turnover ratio rebounded to 5.12, nearing the initial 2020 level.

Average inventory processing period

The average inventory processing period shows an inverse trend relative to the inventory turnover ratio. It decreased from 71 days in 2020 to 65 days in 2021, reflecting faster inventory processing. Subsequently, the period lengthened to 73 days in 2022 and reached a peak of 76 days in 2023, indicating slower inventory turnover. By 2024, the processing period reduced back to 71 days, aligning again with the 2020 figure.

Overall analysis

The data suggests that the company experienced an initial improvement in inventory management efficiency from 2020 to 2021. This was followed by a deterioration in inventory turnover during 2022 and 2023, as evidenced by the lower turnover ratio and longer processing period. The partial recovery in 2024 implies efforts to enhance inventory control, returning metrics closer to the baseline levels observed in 2020. These trends may reflect external factors affecting inventory demand or internal operational adjustments during the period.

Receivables Turnover

The receivables turnover ratio generally increased from 6.11 in 2020 to 7.36 in 2022, indicating an improvement in the efficiency of collecting receivables. However, in 2023, there was a noticeable decline to 6.36, suggesting a temporary slowdown in collection efficiency. By 2024, the ratio rebounded back to 7.36, reaching the highest value in the five-year period, which indicates the company restored its ability to collect receivables more frequently during the year.

Average Receivable Collection Period

The average collection period shows an inverse and complementary trend to the receivables turnover ratio. Starting at 60 days in 2020, it steadily decreased to 50 days by 2022, reflecting quicker cash collection from receivables. In 2023, this period increased again to 57 days, paralleling the dip observed in the receivables turnover ratio. In 2024, the collection period returned to 50 days, confirming an improvement in collection efficiency back to its previous best level.

Overall Insights

The data demonstrates a pattern of enhanced receivable management from 2020 to 2022, with faster collection cycles and increased turnover. The dip in 2023 indicates a temporary decline in efficiency, which was reversed in 2024. Such fluctuations may suggest external factors impacting receivables management or operational adjustments that affected collection performance but were subsequently addressed. The recovery to prior levels in 2024 is a positive indication of stability and effective credit management.

Average inventory processing period

This metric exhibits fluctuation over the analyzed years, starting at 71 days in 2020, decreasing to 65 days in 2021, then increasing to a peak of 76 days in 2023 before declining back to 71 days in 2024. This pattern suggests variability in inventory turnover efficiency, with the longest processing time observed in 2023.

Average receivable collection period

The average receivable collection period shows an overall declining trend from 60 days in 2020 to 50 days in 2022, indicating improved effectiveness in collecting receivables. However, there is an increase to 57 days in 2023, followed by a return to 50 days in 2024, reflecting some inconsistency but generally maintaining a shorter collection period compared to earlier years.

Operating cycle

The operating cycle, which combines inventory processing and receivable collection durations, decreases from 131 days in 2020 to 120 days in 2021, indicating an improvement in overall operational efficiency. It then slightly increases to 123 days in 2022 and further to 133 days in 2023, suggesting a temporary elongation of the cycle. In 2024, the cycle shortens again to 121 days, approaching the improved efficiency level noted in 2021. This trend shows some volatility but an overall commitment to operational cycle reduction by the end of the period.

Payables Turnover

The payables turnover ratio demonstrates a generally declining trend over the five-year period. It started at 5.56 in 2020, increased slightly to 5.93 in 2021, but then declined steadily to 5.07 by 2024. This decline suggests that the company is turning over its payables less frequently each year after 2021.

Average Payables Payment Period

The average payables payment period shows an opposite pattern to the payables turnover ratio, increasing from 66 days in 2020 to 72 days in 2024. After a decrease to 62 days in 2021, the payment period has progressively lengthened over the subsequent years, reaching the longest duration in the final year observed.

Overall Insights

The inverse relationship between the payables turnover ratio and the average payment period is consistent, as a lower turnover rate corresponds with a longer payment period. This pattern indicates that over the five years, particularly after 2021, the company has been taking more time to settle its payables. This shift might reflect changes in cash management policies, supplier negotiations, or working capital management strategy, potentially signaling an effort to optimize liquidity by delaying payments.

Average Inventory Processing Period

The average inventory processing period fluctuated over the five-year span, starting at 71 days in 2020 and decreasing to 65 days in 2021. It then increased to 73 days in 2022 and further to 76 days in 2023 before declining back to 71 days in 2024. This indicates variability in inventory turnover efficiency, with a peak in days held during 2023.

Average Receivable Collection Period

The average receivable collection period showed an overall downward trend, moving from 60 days in 2020 down to 50 days by 2022. There was a slight rise to 57 days in 2023, followed by a decrease back to 50 days in 2024. This suggests improvement in receivables management with some inter-annual variability.

Average Payables Payment Period

The average payables payment period consistently increased over the timeframe, beginning at 66 days in 2020 and rising gradually each year to reach 72 days in 2024. This reflects a trend toward longer payment terms or delayed payables, which could impact supplier relationships or cash flow.

Cash Conversion Cycle

The cash conversion cycle generally decreased, starting at 65 days in 2020 and reducing to 49 days by 2024, despite a temporary increase to 64 days in 2023. The declining cycle length suggests improvements in the overall working capital management by shortening the time between outlays and cash inflows.