⚠ Goodwill Can Be Written DownLow threat

RTX (RTX) — threat to the moat

Collins carries $32.8 billion of goodwill, and RTX has written goodwill down once before.

Goodwill is an estimate of future profits, and estimates can be revised. RTX took a $3,183 million goodwill impairment in 20201, the year of the merger and of the pandemic collapse in air travel. Collins carries $32,776 million of goodwill today2.

Goodwill by segment, end of 2025 ($M)32,776Collins18,987Raytheon1,563Pratt & WhitneyRTX Form 10-K FY2025
Collins holds most of it.

An impairment does not cost cash. It does say that the price paid for a business was more than the business is now expected to earn, and it removes the comfortable assumption that the premium will be recovered.

The trigger would be a long commercial aerospace downturn. Collins's commercial aerospace and other commercial sales were $18,858 million of its $27,585 million of external sales in 20253, about 68%4, so it is the segment most exposed to airlines.

The goodwill is not spread evenly. Collins holds $32,776 million, Raytheon $18,987 million and Pratt & Whitney only $1,563 million5. Pratt & Whitney, the segment with the thinnest margin, carries almost none of the acquisition premium, and Collins, the segment with the best margin, carries most of it.

The warning sign is Collins's operating profit falling for two consecutive years. Profit was $4,923 million in 20256; a sustained fall below $4 billion would bring the size of the goodwill back into question.

References
  1. ReportedRTX took a $3,183 million goodwill impairment in 2020, the year of the merger and of the pandemic collapse in air travel.
    RTX Form 10-K for fiscal 2020 - continuing-operations results for 2018-2020 and the $3,183 million goodwill impairment. — FY2020 · publ. February 2021 · source ↗
  2. ReportedCollins carries $32,776 million of goodwill today.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  3. ReportedCollins's commercial aerospace and other commercial sales were $18,858 million of its $27,585 million of external sales in 2025, about 68%, so it is the segment most exposed to airlines.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - Collins Aerospace: segment sales, operating profit, organic drivers, customer types, assets and capital expenditure. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  4. Moat Explorer calcCollins's commercial aerospace and other commercial sales were $18,858 million of its $27,585 million of external sales in 2025, about 68%, so it is the segment most exposed to airlines.
    Moat Explorer calculation from RTX's segment results (Forms 10-K FY2023 and FY2025, Q2 2026 earnings release; $ millions). Operating margins: Collins 2,380 / 21,152 = 11.3% (2021), 2,816 / 23,052 = 12.2% (2022), 4,923 / 30,196 = 16.3% (2025), H1 2026 2,613 / 15,812 = 16.5%, Q2 2026 1,306 / 8,210 = 15.9%, Q1 2026 (first half less Q2) 1,307 / 7,602 = 17.2%; Pratt & Whitney 454 / 18,150 = 2.5% (2021), 1,075 / 20,530 = 5.2% (2022), 2,015 / 28,066 = 7.2% (2024), 2,596 / 32,916 = 7.9% (2025), H1 2026 1,448 / 17,062 = 8.5%, Q2 2026 738 / 8,889 = 8.3%; Raytheon 3,399 / 26,611 = 12.8% (2021), 2,448 / 25,176 = 9.7% (2022), 2,379 / 26,350 = 9.0% (2023), 3,227 / 28,043 = 11.5% (2025), Q2 2026 1,042 / 8,269 = 12.6%; Q1 2026 Raytheon sales 15,214 - 8,269 = 6,945. Growth 2021-2025: Collins 30,196 / 21,152 - 1 = 43% (about 9% a year), operating profit 4,923 / 2,380 = 2.07 times; Pratt & Whitney 32,916 / 18,150 - 1 = 81%, 2025 32,916 / 28,066 - 1 = 17%; Raytheon 28,043 / 26,611 - 1 = 5%. 2025 shares of segment sales (91,155): Pratt & Whitney 36%, Collins 33%, Raytheon 31%; of segment operating profit (10,746): Collins 4,923 = 45.8%, Raytheon 3,227 = 30.0%, Pratt & Whitney 2,596 = 24.2%. Operating profit over segment assets 2025: Collins 4,923 / 71,680 = 6.9%, Raytheon 3,227 / 44,795 = 7.2%, Pratt & Whitney 2,596 / 52,482 = 4.9%. Pratt & Whitney services share 14,449 / 32,916 = 44%; services growth 14,449 / 9,717 = 1.49 times. Collins commercial share 18,858 / 27,585 = 68%; Collins government sales 7,061 + 436 + 1,230 = 8,727, 8,727 / 27,585 = 32%. Raytheon U.S. government share 19,237 / 27,892 = 69%. Collins services share 6,118 / 27,585 = 22%. Pratt & Whitney segment assets 52,482 / 44,307 - 1 = 18%. Pratt & Whitney 2025 defence bookings other than F135: about 9.0 - 2.9 - 2.4 = 3.7 billion. GE Aerospace Commercial Engines & Services profit 8,861 against Pratt & Whitney 2,596: 3.4 times; margins 26.6% against 7.9%. — 2021-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in RTX's Forms 10-K and 10-Q, earnings releases, earnings call and market data; operands shown in the source line.
  5. ReportedCollins holds $32,776 million, Raytheon $18,987 million and Pratt & Whitney only $1,563 million.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  6. ReportedProfit was $4,923 million in 2025; a sustained fall below $4 billion would bring the size of the goodwill back into question.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - totals across segments: segment sales and profit, eliminations, acquisition accounting and FAS/CAS adjustments. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026