RTX (RTX) is benefiting from multiple powerful trends in the defense sector, including very strong demand for its missile defense and missile offerings. Also meaningfully boosting the firm is the rapid growth of its overseas sales.
Meanwhile, RTX recently reported very impressive second-quarter results. Conflicts in the Mideast now seem much less likely to damage its civilian aviation business meaningfully. Finally, the valuation of RTX stock is attractive, in light of its multiple, positive catalysts and overall upbeat outlook.
In a previous column published on June 1, I expressed caution about the name because of the pressures that were then facing airlines. Given the company’s positive points above and the improved prospects of its civil-aviation business, the shares are now appealing to some investors.
A Beneficiary of a Few Powerful Trends in the Defense Sector
With the U.S. and its allies looking to boost missile-defense capabilities greatly, RTX has been able to capitalize on its efforts in this area. For example, the firm obtained over $5 billion in orders for its GEM-T effectors for the Patriot missile-defense system last quarter, and the firm indicated on its earnings call that it had shipped more Patriot components in Q2 than during the same period a year earlier.
What’s more, CEO Chris Calio indicated that the firm’s Lower Tier Air and Missile Defense Sensor (LTAMDS) product, which is incorporated into missile-defense systems, would get meaningfully more funding under the Trump administration’s proposed fiscal 2027 budget. Further, President Donald Trump’s decision to grant Ukraine a license to build Patriots could boost the firm’s revenue and profits. That’s because the Patriots have been supply-constrained and any licensing fees would likely carry very high gross margins for RTX.
Also importantly, the CEO noted that the company is looking to increase its “critical munitions output” to meet demand. At the same time, the Trump administration’s FY27 budget request includes “meaningful increases” for two of the company’s missiles, the Tomahawk and the Standard Missile.
Finally, showing that the demand for RTX’s products is rapidly growing overseas, its contract awards from foreign nations jumped more than 100% year-over-year to $10 billion in the first half of 2026.
Excellent Q2 Results
The company’s revenue jumped 14% versus the same period a year earlier to $24.7 billion, while its earnings per share, excluding certain items, soared 21% year-over-year to $1.89. Moreover, RTX’s backlog jumped 22% YOY to $289 billion.
On the guidance front, the firm increased its 2026 adjusted revenue outlook to $95 billion-$96 billion from $92.5 billion to $93.5 billion and raised its adjusted EPS guidance to $7.10-$7.25 from $6.70-$6.90.
The Outlook of the Civil-Aviation Business Has Greatly Improved
In my previous column, I noted that European airlines were facing significant difficulties due to high jet-fuel prices, and I noted that almost half of RTX’s revenue was reportedly derived from “commercial aerospace and other commercial sales.” Consequently, I was cautious on RTX stock. But European jet fuel prices are off their peaks and generally stabilizing, while earlier fears of jet-fuel shortages on the continent have dissipated.
Also importantly, with U.S. Congressional elections coming up at the beginning of November and the Iranian economy in serious trouble, both America and Iran are highly incentivized to avoid a return to all-out war. Similarly, Israeli elections are due to take place at the end of October. That country’s government is unlikely to attack Iran ahead of the vote, since many Israelis are tired of wars.
As a consequence of all of these factors, the risks facing RTX’s civil-aviation business have greatly declined since the beginning of June.
Valuation on RTX Stock
The shares are changing hands at a forward price-earnings ratio of 30 times. Given RTX’s rapid growth and strong outlook, that valuation is attractive.
Since the company is very large and its shares are unlikely to soar tremendously, it’s best suited for value and conservative investors.
This article is intended to be informational only; it is not financial advice.
