Wall Street reacted cautiously with RTX’s (RTX) second-quarter results because, in conjunction with the report, the firm lowered its 2025 earnings per share guidance. But Bank of America nonetheless placed a $175 price target on the shares, well above the name’s $157.58 per share price as of the market close on August 4. According to the bank, the weapon maker’s long-term outlook is still quite bullish.
Many other banks appear to agree, as analysts on average expect the company’s earnings per share to jump 11.5% to $6.66 in 2026. And in light of the company’s high exposure to the rapidly growing missile and commercial airlines sectors, it is likely to perform quite well over the next few years, making it a good stock for long-term, conservative investors to buy. Also importantly, the company’s second-quarter results were generally strong, while the stock’s valuation is attractive, given RTX’s upbeat, long-term prognosis.
Exposure to Two Hot Sectors
Over the long term, the global demand for commercial airplanes, driven by emerging markets, is expected to be powerful. “We continue to see strong demand for new airplanes with commercial aviation returning to its pre-pandemic growth trajectory.” Brad McMullen, Boeing senior vice president of Commercial Sales and Marketing, said in a June statement. Pent-up demand is also likely to help strengthen the sales of commercial airplanes, as Boeing (BA) noted that “Aircraft supply remains more than 20% below pre-pandemic levels, and 2024 deliveries remained near 2012 levels, even as air travel rose 60% over the same period.”
RTX already appears to be getting a lift from the strong demand for commercial planes. In Q2, the revenue of its two units that serve the commercial aircraft sector – Collins Aerospace and Pratt & Whitney – climbed 9% and 12%, respectively, versus the same period a year earlier.
And as one of the world’s leading missile makers, RTX should get a big boost from increasing outlays on missiles. Indeed, in addition to the Pentagon’s $175 billion Golden Dome missile defense initiative, the agency is spending huge amounts on other missile projects.
In late July, RTX obtained a $3.5 billion deal to provide its AMRAAM Air-to-Air missile to the Pentagon. And indicating that RTX is optimistic about the outlook of its defense units, CEO Christopher Calio said last month that “On the defense side, the growing need for air dominance is creating unprecedented demand for our core defense products across RTX.” Finally, according to one estimate, the global rocket and missile market will climb at a robust compound annual growth rate of 6.4% between 2024 and 2029, boding well for RTX’s longer-term outlook.
Impressive Q2 Results and an Attractive Valuation
RTX’s sales, excluding the impact of acquisitions and divestments, jumped 9% year-over-year, while its backlog soared 15% YOY to $236 billion. Finally, its segment operating profit increased by an impressive 12% YOY.
The firm did lower its full-year EPS outlook to $5.80 to $5.95 from $6.00 to $6.15. But the company reported that it had made the reduction due to the impact of tariffs and taxes. However, the firm is working on reducing its exposure to tariffs, so their impact on its financial results should ease going forward. Additionally, they also can take steps to reduce its tax burden. RTX’s guidance reduction should not impact its long-term outlook.
Given the defense contractor’s strong Q2 results and powerful, positive catalysts, its forward price-earnings ratio of 26.5 compares favorably to industry peers.
This article is intended to be informational only; it is not financial advice.
