RTX Corp. RTX recently completed a successful live-fire test of its Lower Tier Air and Missile Defense Sensor (“LTAMDS”), showcasing this advanced 360-degree radar’s ability to detect and track threats. During the test, LTAMDS identified a high-speed cruise missile, enabling a Patriot Advanced Capability-2 (PAC-2) Guidance Enhanced Missile-T (GEM-T) to intercept the target.
This achievement reaffirms RTX’s leadership in the missile defense industry, with the company excelling in manufacturing both lethal missile and missile defense systems as well as high-speed radar technology. As LTAMDS integrates into the U.S. Army's defense architecture, such advancements may attract investors interested in defense stocks to add RTX to their portfolio.
However, before making any investment decision, it's essential to assess RTX’s share price trends over the past year, its growth prospects and potential risks (if any). A closer look at these factors will provide investors with a more informed perspective.
RTX Outperforms Industry, Sector & S&P500
RTX’s shares have surged an impressive 37.1% in the past year, outperforming the Zacks Aerospace-Defense industry’s decline of 3.3% and the broader Zacks Aerospace sector’s growth of 5.4%. RTX has also outpaced the S&P 500’s return of 21.3% in the same period.
Image Source: Zacks Investment Research
Other defense players, such as Rocket Lab USA RKLB, TransDigm Group TDG and Leidos Holdings LDOS, have put up similar stellar performances. Share prices of RKLB, TDG and LDOS have surged 478.7%, 15.4% and 6.9%, respectively, over the past year.
What Pushed RTX Stock Up?
Steadily improving commercial air traffic has been boosting commercial OEM as well as commercial aftermarket sales for RTX in recent times. This must have encouraged stakeholders to stay invested in this stock, further corroborated by the solid share price return offered year to date.
Keeping up with this trend, RTX’s Collins Aerospace unit registered a 6% year-over-year improvement in its fourth-quarter 2024 top-line figures, partially driven by a 12% increase in commercial aftermarket sales.
On the other hand, a 31% rise in commercial OEM and a 17% improvement in commercial aftermarket sales resulted in an 18% rise in adjusted sales for RTX’s Pratt & Whitney unit. Continued growth in commercial air traffic, including higher flight hours and a favorable OEM mix in Large Commercial Engines, primarily boosted the improvement in commercial aftermarket and OEM sales.
Will RTX Stock Continue With Its Growth Streak?
Looking ahead, growth prospects for the commercial aerospace market and, in turn, RTX’s commercial business remain bright. As per the International Air Transport Association’s (“IATA”) latest report published in December 2024, the number of global passengers is projected to increase at an average annual rate of 3.8% over the next two decades, leading to a net addition of over 4.1 billion passenger journeys by 2043 compared to 2023. This should boost the demand for new aircraft, strengthening commercial OEM as well as commercial aerospace aftermarket sales for RTX in the coming days.
Moreover, as geopolitical tensions and hostilities prevail across various parts of the world, growth opportunities for RTX from its military business remain immense with the company being a prominent U.S. defense contractor. This can be further gauged from the solid backlog of $93 billion that its defense business unit generated as of Dec. 31, 2024.
In line with this, the Zacks Consensus Estimate for RTX’s long-term earnings growth rate is pegged at a solid 9.7%.
A quick sneak peek at its near-term earnings and sales estimates mirrors a similar picture.
RTX’s Upbeat Estimates
The Zacks Consensus Estimate for first-quarter and full-year 2025 revenues reflects a solid improvement of 2.4% and 4.4%, respectively, from the prior-year levels. The earnings estimate figures also indicate a similar picture.
Further, the 1.6% upward revision witnessed in the company’s 2025 earnings estimate over the past 60 days indicates growing investors’ confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Risks to Consider Before Choosing RTX
Despite the aforementioned growth opportunities, there remain certain risks to investing in RTX. One notable headwind plaguing stocks like RTX that operate in commercial aerospace is the supply-chain issue.
Notably, the global supply-chain disruption that was exacerbated during the COVID period remains a major challenge affecting global trade and, thereby, the aerospace sector. In its December 2024 report, the International Air Transport Association (“IATA”) announced that it expects severe supply-chain issues to continue to affect the aviation industry into 2025. This, in turn, might cause RTX to experience failure in delivering its finished products to its customers within the stipulated time. Since its Pratt & Whitney is a major supplier of commercial jet engines, the failure can adversely impact its revenue generation prospects.
RTX Trading at a Discount
In terms of valuation, RTX’s forward 12-month price-to-earnings (P/E) is 20.25X, a discount to its industry average of 22.76X. This suggests that investors will be paying a lower price than the company's expected earnings growth compared to that of its industry.
Image Source: Zacks Investment Research
Should You Buy RTX Now?
Investors interested in defense stocks can consider adding RTX to their portfolio, considering its discounted valuation, upbeat sales and earnings estimate, upward revision in its 2025 earnings estimate, solid performance of its shares at the bourses and long-term growth opportunities.
The company’s Zacks Rank #2 (Buy) further supports our thesis. RTX currently has a VGM Score of B, which is also a favorable indicator of strong performance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpTransdigm Group Incorporated (TDG) : Free Stock Analysis Report
Leidos Holdings, Inc. (LDOS) : Free Stock Analysis Report
RTX Corporation (RTX) : Free Stock Analysis Report
Rocket Lab USA, Inc. (RKLB) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
