RTX Shines Bright Under Defense Spotlight: What Lies Next for the Stock?

U.S.-based RTX Corp. RTX, a leading defense contractor known for its combat-proven technologies, including aircraft engines, missiles, radars, and sensors, continues to secure steady orders from the Pentagon and allied nations. Riding this momentum, the company recently landed several major contracts and unveiled key program updates, drawing investor and media attention. 

Notably, RTX recently won a contract worth up to $1.1 billion to produce AIM-9X Block II missiles — the largest order for this program to date. It also secured a $536 million U.S. Navy contract for the SPY-6 radar family and, in mid-May, a $580 million follow-on contract for the Next Generation Jammer Mid-Band (NGJ-MB) system. At the onset of May, RTX successfully conducted the first flight test of its PhantomStrike radar, achieving advanced target tracking and terrain mapping. 

These achievements reflect RTX’s strong positioning amid rising global defense spending, which might encourage investors looking to capitalize on sustained growth in the defense sector to add this stock to their portfolio right away. However, instead of making a hasty move, let’s delve into the company’s recent performance at the bourses, growth opportunities and investment risks (if any) to make a more informed decision.

RTX Outperforms S&P500, Lags Industry & Sector

RTX’s shares have gained 9.2% over the past month, underperforming the Zacks Aerospace-Defense industry’s surge of 15.7% and the broader Zacks Aerospace sector’s rise of 10.4%. The stock has, however, outpaced the S&P 500’s return of 6.2%.

Notable gains at the bourses have also been reflected in the share price of other prominent missile makers like Lockheed Martin LMT and The Boeing Company BA over the past month. Shares of Boeing surged a solid 12.6%, while those of Lockheed rose 1.4%.

Tailwinds Driving RTX Stock

Beyond its steady stream of defense contracts, RTX is also benefiting from the global surge in air travel — a key growth driver for its Pratt & Whitney and Collins Aerospace segments. In the first quarter of 2025, the company reported 8% organic year-over-year sales growth, largely fueled by strong performance in its commercial aftermarket business. 

Collins Aerospace posted an 8% revenue increase, supported by a 13% rise in commercial aftermarket sales. Meanwhile, Pratt & Whitney saw a 14% year-over-year revenue boost, with commercial aftermarket sales surging 28% and OEM sales rising 3%.

Supporting this operational strength is RTX’s healthy financial position, which also continues to bolster investor confidence in this stock. As of March 31, 2025, the company reported $5.16 billion in cash and cash equivalents against $3.06 billion in current debt, indicating strong short-term solvency. This financial stability also allowed RTX to repurchase $50 million worth of shares during the quarter, further reinforcing its shareholder-friendly capital allocation strategy.

What Lies Ahead for RTX Stock?

Looking ahead, the growth prospects of RTX remain bright both in the defense and commercial aerospace industries. To this end, the Research and Markets firm projects the global defense market to witness a CAGR of 6.4% during 2023-2028 and reach a value of $780.8 billion, backed by factors like growing geopolitical tensions bolstering defense budgets worldwide as well as increasing demand for technologically developed military weapons. This should definitely bode well for prominent defense contractors like RTX, LMT and BA. 

On the commercial aerospace front, the International Air Transport Association (“IATA”) predicts world passengers to increase 3.8% per year on average, resulting in more than 4 billion additional passenger journeys in 2043 compared to 2023. This should boost the demand for new aircraft, thereby strengthening long-term growth opportunities for RTX’s commercial OEM as well as commercial aerospace aftermarket sales. 
In line with this, the Zacks Consensus Estimate for RTX’s long-term earnings growth rate is pegged at a solid 9.3%. 

A quick sneak peek at its near-term earnings and sales estimates mirrors a similar picture.

RTX’s Estimates

The Zacks Consensus Estimate for RTX’s second-quarter 2025 revenues and earnings suggests a solid improvement of 4.9% and 2.8%, respectively, from the prior-year quarter’s level. The annual estimate figures for 2025 and 2026 also indicate a similar picture.

However, the near-term estimates have moved southward over the past 60 days, suggesting declining analysts’ confidence in this stock’s earnings generation capabilities.

Risks to Take Note of Before Choosing RTX

Despite the aforementioned growth opportunities, RTX continues to face significant challenges from ongoing global supply-chain disruptions, which have led to delays and increased costs, affecting its performance in the recent past. These issues, caused by inflation, labor shortages, and macroeconomic pressures, remain a key concern for investors interested in aerospace stocks like BA and RTX. 

The IATA, in its December 2024 outlook, slashed its 2025 jet delivery forecast to 1,802 units from 2,293, citing persistent supply-chain constraints. As Pratt & Whitney is a major jet engine supplier, RTX may face delayed product deliveries, potentially affecting future revenues. 

Additionally, recent U.S. executive orders issued in February 2025 imposed new tariffs on imports, prompting retaliatory measures from China, the EU and Canada. The resultant turmoil, likely to affect global trade, might, in turn, affect defense stocks like RTX, BA and LMT with significant exposure in nations outside America.

RTX Stock Trading at a Premium

In terms of valuation, RTX’s forward 12-month price-to-earnings (P/E) is 22.09X, a premium to its peer group’s average of 21.88X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peers.

Should You Buy or Hold RTX Now?

To conclude, investors interested in RTX should wait for a better entry point, considering its premium valuation and downward earnings estimate revision. RTX currently has a VGM Score of C, which is also not a very favorable indicator of strong performance. 

However, those who already own this Zacks Rank #3 (Hold) stock may stay invested, as the company's upbeat sales estimates, steadily growing commercial air traffic and growing defense product pipeline offer solid prospects.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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