Hook + Thesis
RTX Corporation (RTX) is benefiting from a rare combination of commercial aerospace repairs/services and robust defense demand. Management reported sales north of $88 billion in 2025 and the company carries a roughly $260 billion backlog that underpins multi-year visibility. That fundamental strength is pushing the stock toward its 52-week high of $206.48 and has analysts optimistic.
But strength is already priced in: the stock trades at roughly a 39x trailing P/E and EV/EBITDA of about 22.6. Momentum indicators are showing early signs of fatigue. My practical thesis is this: don’t chase RTX at $197+ — wait for a disciplined dip and buy into the company’s durable cash flows and backlog. Actionable plan below: enter at $175.00, stop loss at $165.00, target $215.00 on a mid-term swing (45 trading days).
What RTX does and why the market should care
RTX is a diversified aerospace and defense conglomerate operating four segments: Collins Aerospace, Pratt & Whitney, Raytheon Intelligence and Space (RIS), and Raytheon Missiles and Defense (RMD). Those divisions span commercial and military engines, avionics and interiors, sensors and cyber, and end-to-end missile systems. That mix gives RTX exposure to a cyclical commercial aviation recovery and structurally higher defense budgets.
Why the market cares: commercial service contracts and MRO (maintenance, repair, overhaul) give high-margin, recurring aftermarket revenues, while defense programs provide long-duration backlog and pricing power. Recent corporate activity at the Singapore Airshow - including a $139 million investment and multiple service contracts announced on 02/03/2026 and 02/05/2026 - illustrates RTX’s dual revenue engines.
Support for the thesis - the numbers
- Sales: Management called out >$88 billion in sales for 2025, a substantial revenue base that supports scale and free cash generation.
- Backlog: Analysts and company commentary cite roughly a $260 billion backlog, providing long-term revenue visibility and insulating near-term growth from cyclical dips.
- Profitability & Cash Flow: Reported free cash flow sits around $7.94 billion, showing solid cash conversion from operations despite heavy capex and investment in capabilities.
- Valuation: Market cap runs about $263 billion with a trailing EPS near $5.02 and a P/E around 39 - elevated relative to historical industrials but explainable by backlog, defense exposure and free cash flow.
- Balance sheet: Debt-to-equity of ~0.58 and current ratio near 1.03 indicate reasonable leverage and liquidity for a large aerospace prime.
- Dividend & shareholder returns: Board declared a quarterly cash dividend of $0.68 per share payable on 03/19/2026 (record date 02/20/2026), yielding roughly 1.36% — a modest income component for shareholders.
Valuation framing
At a market cap near $263 billion and enterprise value of approximately $294 billion, RTX is trading at EV/EBITDA ~22.6 and price-to-sales ~2.97. Those multiples are elevated for an industrial but reflect strong backlog, improving free cash flow (about $7.94B), and recurring commercial aftermarket revenue. Absent precise peer multiples in this note, the takeaway is qualitative: the market is paying a premium for earnings quality and defense revenue durability. That premium is fair — but only if growth and cash conversion continue to outperform. In the short-to-mid run, the valuation leaves the stock vulnerable to consolidations if growth expectations snap back even slightly.
Technical context
Price is trading under the 10-day SMA (~$199.37) and marginally above the 50-day SMA (~$187.08). Momentum indicators show a mixed picture: RSI around 52 (neutral) but the MACD histogram is negative, suggesting bearish momentum building. Short interest is relatively modest in days-to-cover terms (about 1.64 most recently), so a dramatic short-squeeze is unlikely to fuel a sustained breakout. These technicals support a waiting-for-dip approach rather than chasing strength at $197.
Catalysts to watch
- Defense budget movements and large contract awards - continued wins or favorable U.S. government spending decisions could re-rate the stock higher quickly.
- Commercial aviation MRO momentum - additional large aftermarket contracts or capacity investments (like the $139M Singapore commitment announced 02/03/2026) reinforce recurring revenue growth.
- Earnings cadence - sequential margin expansion or better-than-expected free cash flow on quarterly reports could shorten the time to new highs.
- Sector comparables - strong results from peers (or a weak competitor print) could shift relative valuations and investor appetite.
Trade plan (actionable)
Primary idea: Buy the dip: enter at $175.00. Stop loss at $165.00. Target $215.00. This is a mid-term swing trade designed for mid term (45 trading days) execution — enough time for fundamental catalysts or a technical mean reversion to play out. If price reaches the target earlier, consider trimming or moving the stop to breakeven to protect gains.
Why these levels?
- $175.00 is close to the mid-point between the 50-day (~$187) and a meaningful consolidation area from the recent recovery; it represents a logical value entry without assuming a deep correction.
- $165.00 stop protects capital beneath a clear support band; a breach would indicate the breakout thesis is failing and that downside risk is accelerating toward lower levels.
- $215.00 target captures upside toward and above the stock’s recent 52-week high ($206.48) while respecting current valuation; it allows for a re-rating if defense wins or commercial services accelerate.
Time management: Expect the trade to play out over up to 45 trading days. If the business clearly outperforms, re-assess and consider holding longer. If the stock approaches $170-$180 and breadth/volume weaken, consider layering into the position rather than a single-size entry.
Risks and counterarguments
- Valuation vulnerability: At ~39x trailing earnings and EV/EBITDA above 22, the stock is priced for execution. Any miss in margins, cash flow, or orders can trigger a sharp pullback.
- Commercial cyclicality: A slowdown in air travel demand, OEM production cuts, or MRO deferrals would directly pressure Pratt & Whitney and Collins Aerospace revenue streams.
- Defense execution & timing: While backlog is large, program timing and cost overruns can compress near-term margins and shift revenue recognition, weighing on the share price.
- Macro risk & interest rates: Higher rates and a weaker macro can depress multiples across industrials and defense-equipment suppliers, reducing appetite for richly priced names.
- Competition & peer surprises: Stronger-than-expected performance from peers (or a major contract loss) could shift investor preference and cap potential upside.
Counterargument
The bullish case argues that a $260 billion backlog and robust free cash flow create optionality that justifies a premium multiple: predictable defense revenue plus growing, high-margin MRO and services for commercial fleets give RTX sustainable earnings growth. If the company continues to beat expectations and convert backlog efficiently, $215 (and higher) is a conservative target. In that light, buying now could capture immediate upside — but the risk is paying full price when a short-term consolidation would offer the same exposure at lower risk.
Conclusion and what would change my mind
My base stance: be patient and buy into weakness. RTX is a high-quality aerospace and defense franchise with strong backlog and cash flow, but current market pricing and technical signs argue for waiting for a better entry. Enter at $175.00 with a $165.00 stop and $215.00 target over a 45 trading-day horizon.
I would change my mind and move to a more aggressive buy-now stance if RTX reports sustained margin expansion, materially raises free cash flow guidance, or wins a sizable, market-moving contract that meaningfully de-risks backlog conversion — any combination that meaningfully shortens the path to earnings growth and justifies the current premium multiple. Conversely, a material miss in revenue, margin compression, or a visible slowdown in commercial aftermarket demand would invalidate this trade and likely widen my stop/exit criteria.
Key dates to watch: dividend payable on 03/19/2026 (record date 02/20/2026), upcoming quarterly reports and any large contract announcements during defense budget cycles.
Quick snapshot
| Metric | Value |
|---|---|
| Current Price | $197.02 |
| Market Cap | $263 billion |
| Trailing EPS | $5.02 |
| P/E | ~39x |
| Free Cash Flow (recent) | $7.94 billion |
| Backlog | ~$260 billion |
Trade checklist: Confirm price reach of $175.00 with acceptable volume profile; position size according to your risk tolerance; set stop at $165.00 and place profit-taking plan at $215.00. Re-evaluate on release of new defense orders, earnings beats/misses, or material changes to backlog conversion assumptions.