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Bull: Commercial flight hours exceed pre-pandemic trends indefinitely, driving outsized, high-margin aftermarket sales.
Supply Chain Collapse: Protracted shortages in titanium and specialized aerospace components halt commercial aircraft deliveries, severely delaying backlog conversion and capping near-term cash generation.
RTX Corporation is a highly established aerospace and defense compounder benefiting from a massive installed base of commercial aircraft and secular defense spending. The company's diverse portfolio offers highly visible, long-tailed cash flows, but current market pricing leaves little room for execution error.
RTX Corporation is a highly established aerospace and defense compounder benefiting from a massive installed base of commercial aircraft and secular defense spending. The company's diverse portfolio offers highly visible, long-tailed cash flows, but current market pricing leaves little room for execution error.
High switching costs in commercial aviation aftermarket
Intangible assets via defense IP and classified clearances
Commercial aviation super-cycle driven by aging fleet replacements and elevated global passenger traffic.
Hold. A high-quality moat and robust cash flow profile are fully priced into current shares, balancing visible aerospace tailwinds against near-term supply chain and margin execution risks.
RTX Corporation, an aerospace and defense company, provides systems and services for commercial, military, and government customers worldwide. It operates through three segments: Collins Aerospace (Collins), Pratt & Whitney, and Raytheon. The Collins segment offers aerospace and defense products, and aftermarket services for civil and military aircraft manufacturers and commercial airlines, as well as regional, business, and general aviation, defense, and commercial space operations. This segment designs, manufactures, and supplies electric power generation and management and distribution, environmental control, flight control, air data and aircraft sensing, engine control, and engine nacelle systems, as well as engine components; cabin interiors, including seating, oxygen, food and beverage preparation, storage and galley, lavatory, and wastewater management systems; connected aviation solutions and services; and systems solutions for connected battlespace, test and training range systems, crew escape systems, and simulation and training. It also provides spare parts, overhaul and repair, engineering and technical support, training and fleet management solutions, and asset and information management services. The Pratt & Whitney segment supplies aircraft engines for commercial, military, business jet, and general aviation customers; and produces, sells, and services military and commercial auxiliary power units, as well as offers fleet management and aftermarket maintenance, repair, and overhaul services. The Raytheon segment provides defensive and offensive threat detection, tracking, and mitigation capabilities for government and commercial customers. This segment offers sensors, mission orchestration and satellite control products, and software. The company was formerly known as Raytheon Technologies Corporation and changed its name to RTX Corporation in July 2023. RTX Corporation was incorporated in 1934 and is headquartered in Arlington, Virginia.
Testing a scenario where commercial flight hours normalize below historical trends alongside flat US defense budgets. Under these conditions, the commercial aftermarket premium fades prematurely, and RTX's normalized operating margin compresses toward 10%, effectively eliminating the current upside and anchoring valuation closer to the $134 bear-case target.
High switching costs in commercial aviation aftermarket
Intangible assets via defense IP and classified clearances
Massive installed base of Pratt & Whitney engines
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $9.8B after capex $3.1B, with terminal value at 72.4% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
If aftermarket revenue beats internal valuation cross-checks by >500bps, expect multiple expansion toward the $236 high target. If defense margins contract on fixed-price overruns, expect reversion to the $160 support level.
If aftermarket revenue beats internal valuation cross-checks by >500bps, expect multiple expansion toward the $236 high target. If defense margins contract on fixed-price overruns, expect reversion to the $160 support level.
If aftermarket revenue beats internal valuation cross-checks by >500bps, expect toward the $236 high target. If defense margins contract on fixed-price overruns, expect reversion to the $160 support level.
Heavy upfront R&D and CapEx investments are transitioning into a long-tailed cash harvesting phase via high-margin aftermarket servicing.
Commercial aviation super-cycle driven by aging fleet replacements and elevated global passenger traffic.
Defense procurement troughs and commercial aerospace supply chain bottlenecks limiting production rates.
Heavy upfront R&D and CapEx investments are transitioning into a long-tailed cash harvesting phase via high-margin aftermarket servicing.
Target neutral weight. Hold existing allocations given the balanced risk/reward at current valuation.
Trim exposure dynamically if shares approach the $216 external internal valuation cross-checks without corresponding upside revisions to FCF generation.
Hold. RTX offers durable cash generation and an unmatched commercial aftermarket moat, but at $176, the 5.3% upside to fair value provides an inadequate margin of safety to justify aggressive new capital deployment.
The $185.40 fair value reflects a disciplined synthesis across primary intrinsic and cash-flow models. While visible aerospace upside and strong FCF generation support the thesis, current pricing effectively captures the near-term commercial momentum.
Hold. RTX offers durable cash generation and an unmatched commercial aftermarket moat, but at $176, the 5.3% upside to fair value provides an inadequate margin of safety to justify aggressive new capital deployment.
Reassess the thesis against the named valuation, risk, and quarterly checkpoint evidence in this report.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Supply chain bottlenecks and raw material shortages become systemic, preventing commercial deliveries. Simultaneously, US defense budgets contract, limiting growth upside across the Raytheon and Pratt & Whitney segments and compressing consolidated margins.
Protracted shortages in titanium and specialized aerospace components halt commercial aircraft deliveries, severely delaying backlog conversion and capping near-term cash generation.
A significant shift in US geopolitical strategy or domestic fiscal policy freezes defense spending, crushing growth for Raytheon and capping segment margins.
Severe cost overruns on legacy fixed-price defense development programs destroy segment profitability, requiring massive cash outflows to fulfill contractual obligations.
The five developments that would weaken our investment case.
Fading commercial aftermarket flight hours or supply chain disruptions curb high-margin parts replenishment, reducing commercial aerospace segment revenue and slowing consolidated cash generation.
Current:9.7% for the period ended 2025-12-31
Alert if< 2.8% over two consecutive fiscal years
Severe cost overruns on fixed-price defense development contracts compress defense operating margins, requiring substantial cash outflows to satisfy legacy contractual commitments.
Current:10.5% for the period ended 2025-12-31
Alert if< 8.1% over two consecutive fiscal quarters
A prolonged freeze in defense budget allocations slows backlog replenishment, compressing order intake below billings and diminishing long-term defense segment revenue visibility.
Current:20.1% for the period ended 2025-12-31
Alert if< 17.5% over four consecutive quarters
Unanticipated delays and elevated inspection expenses for geared turbofan engines elevate compensation liabilities to airline operators, directly impairing annual free cash flow and earnings.
Current:4.96 for the period ended 2025-12-31
Alert if< 3.55 over four consecutive quarters
Elevated capital expenditures unbacked by accelerated sales conversion compress free cash flows, restricting capital deployment options and lowering return on invested capital across multi-year cycles.
Current:1.57 as of 2026-05-08
Alert if< 1.00 over four consecutive quarters
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Solve for the growth rate that makes the model value equal the report-date share price.
Commercial flight hours exceed pre-pandemic trends indefinitely, driving outsized, high-margin aftermarket sales. Defense segment margins structurally improve as legacy fixed-price development programs mature and scale into highly profitable production runs.
RTX converts its massive commercial and defense backlog at a steady pace. Modest supply chain headwinds persist but are offset by steady pricing power. Operating margins stabilize around 13%, and terminal multiple remains anchored at 20x.
If aftermarket revenue beats internal valuation cross-checks by >500bps, expect multiple expansion toward the $236 high target. If defense margins contract on fixed-price overruns, expect reversion to the $160 support level.
Warning level: < 2.8% over two consecutive fiscal years. Fading commercial aftermarket flight hours or supply chain disruptions curb high-margin parts replenishment, reducing commercial aerospace segment revenue and slowing consolidated cash generation.
Warning level: < 8.1% over two consecutive fiscal quarters. Severe cost overruns on fixed-price defense development contracts compress defense operating margins, requiring substantial cash outflows to satisfy legacy contractual commitments.
Warning level: < 17.5% over four consecutive quarters. A prolonged freeze in defense budget allocations slows backlog replenishment, compressing order intake below billings and diminishing long-term defense segment revenue visibility.
Warning level: < 3.55 over four consecutive quarters. Unanticipated delays and elevated inspection expenses for geared turbofan engines elevate compensation liabilities to airline operators, directly impairing annual free cash flow and earnings.
Warning level: < 1.00 over four consecutive quarters. Elevated capital expenditures unbacked by accelerated sales conversion compress free cash flows, restricting capital deployment options and lowering return on invested capital across multi-year cycles.
| $68.92B |
| $80.74B |
| $88.60B |
| +9.7% |
| Gross profit | $13.67B | $12.09B | $15.41B | $17.79B | +9.2% |
| Operating income | $7.42B | $5.49B | $8.16B | $10.57B | +12.5% |
| Net income | $5.20B | $3.20B | $4.77B | $6.73B | +9.0% |
| EPS (diluted) | $3.50 | $2.23 | $3.55 | $4.96 | +12.3% |
| EBITDA | $11.53B | $9.70B | $12.53B | $14.95B | +9.1% |
| R&D | $2.71B | $2.81B | $2.93B | $2.81B | +1.2% |
| SG&A | $5.57B | $5.81B | $5.81B | $6.10B | +3.0% |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 88,603,000,000 |
|---|---|
| Cost of revenue | 70,814,000,000 |
| Gross profit | 17,789,000,000 |
| Operating expenses | 8,489,000,000 |
| Operating income | 9,300,000,000 |
| Non-operating items and tax | -2,568,000,000 |
| Net income | 6,732,000,000 |
| Total assets | 158,864,000,000 |
|---|---|
| Cash | 6,220,000,000 |
| Current assets | 42,443,000,000 |
| Total liabilities | 84,650,000,000 |
| Current liabilities | 39,114,000,000 |
| Shareholders’ equity | 72,632,000,000 |
Point-in-time financial data used in the 2026-05-08 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022-12-31 | 67.1B | 11.5B | 5.2B | 7.2B | 4.4B | 2.8B | 4.1B | 420M | 2.8B | 3.1B | 487M | — | — | — | — | 6.2B | 33.5B | 8.2% | — | 7.8% | — |
| 2023-12-31 | 68.9B | 9.7B | 3.2B | 7.9B | 4.7B | 3.2B | 4.2B | 686M | 12.9B | 3.2B | 11.8B | — | — | — | — | 6.6B | 45.2B | 5.2% | — | 7.7% | — |
| 2024-12-31 | 80.7B | 12.5B | 4.8B | 7.2B | 3.9B | 3.2B | 4.4B | 790M | 444M | 3.2B | -2.5B | — | — | — | — | 5.6B | 42.9B | 8.1% | — | 7.9% | — |
| 2025-12-31 | 88.6B | 14.9B | 6.7B | 10.6B | 7.4B | 3.1B | 4.4B | 1.1B | 50M | 3.6B | -3.4B | — | — | — | — | 7.4B | 39.5B | 10.5% | — | 6.8% | — |
RTX trades at 23.3x forward earnings against a peer median of 34.3x; EV/EBITDA of 17.8x against a peer median of 17.1x; 6 peers.
| Accumulate on pullbacks below $165, where the moat-fade model indicates a margin of safety against execution risks. |
| The Boeing Company |
| 53.9x |
| 2.0x |
| -64.9x |
| 169.9% |
| 1.7% |
| LMT | Lockheed Martin Corporation | 16.0x | 1.6x | 17.1x | 67.6% | 11.0% |
| HWM | Howmet Aerospace Inc. | 48.4x | 13.2x | 44.1x | 30.4% | 26.3% |
| GD | General Dynamics Corporation | 19.3x | 1.7x | 15.4x | 18.0% | 10.5% |
