RTX's $289 Billion Backlog Is Mainly Commercial, Not Defense. Here's Why That Split Is the Real Story.
The commercial aerospace and defense businesses support each other across a range of market conditions, and their backlogs help secure their cash flows and business operations.
Overview
The 60/40 split between the commercial aerospace and defense backlogs at RTX (NYSE: RTX) has benefited the company significantly, and not just from a strong recovery in commercial aerospace. There's a strong case for arguing that the commercial aerospace business and backlog have improved the defense business and backlog.
Historically, the commercial aerospace industry was seen as cyclical, characterized by alternating growth spurts and slowdowns. In contrast, the defense industry was seen as steady and low-growth, with the U.S. government as its primary customer.
Details
This combination was one reason for the merger of the former United Technologies' heavy commercial aerospace business and the defense-focused Raytheon Company, which ultimately produced RTX. Earnings and cash flow from the defense business would support the commercial aerospace business through any cyclical downturn, enabling it to continue investing in its long-cycle solutions and prosper when the cycle turned up again.
Source
Originally published at www.fool.com.
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