Last Update20 Oct 25Fair value Increased 5.27%
Analysts have raised their price target for RTX from $166.56 to $175.33 per share. They cite stronger-than-expected segment results and improving industry outlooks as key factors behind the increase.
Analyst Commentary
Recent research updates reflect a nuanced perspective on RTX's outlook, with both optimistic and cautious viewpoints shaping valuation and growth expectations.
Bullish Takeaways- Bullish analysts point to broad-based strength across RTX's three operating segments, indicating robust execution and adaptability in core business lines.
- Upward revisions to price targets reflect confidence in RTX's improving industry positioning and ability to navigate tariff impacts. Expectations for growth are reinforced by increased defense spending and commitments from NATO countries.
- Improved outlook on tariff-related costs suggests that management is effectively managing external challenges within updated guidance for the coming year.
- New mandatory U.S. defense budget allocations, as well as continued resource support for Ukraine, are seen as significant tailwinds that bolster long-term revenue visibility and resilience against market volatility.
- Bearish analysts maintain some caution regarding tariff and product mix headwinds, which have led to a downward adjustment in RTX's 2025 adjusted EPS outlook.
- Although longer-term forecasts remain intact, there are concerns that cost pressures could weigh on short-term margins and limit potential near-term upside.
- Continued EPS sensitivity to external factors, such as tariffs and evolving geopolitical tensions, underscores the need for vigilant risk assessment.
What's in the News
- The Pentagon is urging missile suppliers, including RTX, to significantly increase missile output to address concerns over a possible future conflict with China (WSJ).
- European airports experienced widespread disruptions after hackers targeted check-in and boarding systems using software from Collins Aerospace, an RTX company (Reuters).
- The U.S. Defense Secretary has called an urgent meeting of top military commanders, highlighting the increased focus on national defense and the role of major contractors such as RTX (WaPo).
- Due to U.S.-China trade tensions, China has limited exports of critical minerals. This has resulted in production delays for Western defense companies, including RTX (WSJ).
- The U.S. is moving to ease restrictions on international sales of advanced military drones, creating new opportunities for manufacturers like RTX (Reuters).
Valuation Changes
- Consensus Analyst Price Target has risen from $166.56 to $175.33 per share, reflecting a modest upward adjustment in fair value estimates.
- Discount Rate has increased slightly, up from 8.09% to 8.15%. This indicates a marginal uptick in perceived risk or required return.
- Revenue Growth projections have risen fractionally, moving from 5.38% to 5.39%. This suggests stable but slightly improved sales prospects.
- Net Profit Margin expectations have decreased marginally, dropping from 9.30% to 9.12%. This points to slightly lower anticipated profitability.
- Future P/E Ratio has increased from 31.47x to 33.84x, indicating expectations for stronger forward earnings growth or a willingness to pay a higher premium for RTX shares.
Key Takeaways
- Expanding defense contracts and strong commercial aerospace performance position RTX for sustained revenue growth and improved margins across core business segments.
- Strategic focus on technology investments and portfolio optimization is driving higher profitability, better capital allocation, and increased resilience against operational risks.
- RTX faces major risks from tariff volatility, jet engine cost overruns, dependence on defense budgets, commercial aviation headwinds, and an inflexible fixed-cost structure.
Catalysts
About RTX- An aerospace and defense company, provides systems and services for the commercial, military, and government customers in the United States and internationally.
- Robust and growing backlog, highlighted by a 1.86 quarter book-to-bill ratio, $236 billion backlog (up 15% year-over-year), and major new international contracts (e.g., EU, MENA, Asia-Pacific) indicate RTX is well-positioned to benefit from sustained increases in global defense spending and heightened geopolitical tensions, setting up strong visibility for future revenue growth.
- Accelerated ramp in both commercial aerospace OE and aftermarket (mid-teens aftermarket growth and high single digit OE growth expected for the year), combined with persistent low aircraft retirement rates and expanding air travel in emerging markets, are driving higher recurring revenues and margin expansion in RTX's commercial segments-supporting future earnings growth.
- RTX's ongoing investment into proprietary digital platforms, autonomy, and AI-demonstrated by new partnerships (e.g., Shield AI) and operational adoption to increase shop productivity-positions the company to capture higher-margin, tech-driven defense and aerospace opportunities, which should improve long-term margins and pricing power.
- Strategic portfolio optimization, with divestitures of non-core assets (e.g., $1.8B sale of actuation business and $765M sale of Collins Simmonds Precision Products), is sharpening RTX's focus on core aerospace and defense, improving capital allocation and return on invested capital, and freeing balance sheet capacity for further innovation, all of which are likely to drive higher net margins and free cash flow over time.
- GTF engine fleet management improvements, rising MRO output, and successful supply chain stabilization for both OE and aftermarket (e.g., 22% Y/Y improvement in PW1100 MRO, ongoing introduction of higher-durability GTF Advantage/Hot Section Plus), enable RTX to reduce costly engine AOGs and warranty drag, unlock higher aftermarket profitability, and minimize downside risk to operating margins and earnings.
RTX Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming RTX's revenue will grow by 5.3% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.4% today to 9.1% in 3 years time.
- Analysts expect earnings to reach $8.9 billion (and earnings per share of $6.72) by about September 2028, up from $6.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $7.7 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.7x on those 2028 earnings, down from 33.0x today. This future PE is lower than the current PE for the US Aerospace & Defense industry at 34.4x.
- Analysts expect the number of shares outstanding to grow by 0.57% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.09%, as per the Simply Wall St company report.
RTX Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Ongoing exposure to elevated and unpredictable tariff costs-despite mitigation efforts-remains a significant headwind, and further tariff escalations or trade tensions could materially compress operating margins and free cash flow.
- Persistent risks of jet engine reliability and aftermarket cost overruns, especially at Pratt & Whitney (GTF and V2500 programs), could lead to unanticipated warranty expenses, higher provisioning, and ultimately hurt net margins and earnings growth.
- Heavy reliance on government and defense contracts exposes RTX to potential revenue volatility if U.S. or allied defense budgets are reduced, delayed, or reprioritized away from large hardware projects to alternative defense spending like cyber or software solutions.
- Structural challenges in commercial aviation-such as possible long-term slowdown in new aircraft demand, rising environmental regulation, or shifting ESG investor priorities-could weaken the sustainability of high-margin aftermarket recurring revenue and impact topline growth.
- High fixed-cost structure, ongoing restructuring at Collins, and the need for continuous large-scale investment in capacity, R&D, and supply chain resilience mean that any stagnation or negative turn in volume trends would significantly erode operating leverage, impacting both profitability and free cash flow.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $163.842 for RTX based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $180.0, and the most bearish reporting a price target of just $134.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $97.7 billion, earnings will come to $8.9 billion, and it would be trading on a PE ratio of 31.7x, assuming you use a discount rate of 8.1%.
- Given the current share price of $151.75, the analyst price target of $163.84 is 7.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Read more narratives
There are no other narratives for this company.
View all narratives