RTX Corporation (RTX) remains a prime aerospace and defense stock for 2025. The company’s consistent growth trajectory in revenue and earnings benefits from powerful catalysts such as increasing demand for defense systems, a robust commercial aftermarket, and operational efficiencies driving margins higher. Its latest results reflect these strengths, while its significant backlog should support further growth next year. In the meantime, shares appear to be trading at an attractive valuation. Thus, I am bullish on RTX stock following its market-beating returns over the past year.
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Several Catalysts Drive RTX’s Revenue Growth
RTX’s top-line growth has been strong in recent quarters, reinforced by several catalysts. This trend was highlighted in its most recent Q3 results, where the company reported an 8% year-over-year organic sales growth and significant progress across each of its business segments. Its commercial aftermarket sales led the charge, climbing 11% as global air travel recovery bolstered demand for parts and repair services. Defense sales also saw a 10% organic uptick, driven by strong execution on the massive backlog, which included $90 billion in defense-related orders.
More importantly, RTX shows no signs of slowing down, given the performance of its specialized subsidiaries. Last quarter’s standout wins included $16.6 billion in new awards for Raytheon’s missile defense systems, such as a $3 billion Patriot contract and $1.9 billion for its next-generation LTAMDS radar system. Leading the charge was Pratt & Whitney, with the subsidiary showing strong traction by signing a $1.3 billion contract for F-135 engine upgrades. Finally, beyond its defense products, Collins Aerospace landed a $470 million contract from the FAA to enhance air traffic control systems, highlighting notable progress in RTX’s commercial operations.
Excellent Margins Deliver Substantial Earnings Growth
RTX’s impressive earnings growth is a key catalyst that supports my bullish outlook on the stock. Adjusted EPS grew 16% year-over-year in Q3, reaching $1.45. Segment operating profit rose 16%, reflecting robust drop-through on higher volumes and improved productivity. Specifically, segment margins expanded by 100 basis points, which I believe demonstrates the company’s operational prowess, considering several supply chain challenges.
To paint the picture for you, some key drivers of profitability included efficiency initiatives, such as RTX’s “Industry 4.0” practices (referring to the 4th industrial revolution, leveraging ground-breaking technology such as IoT and AI), and digital analytics technology across 34 of its factories. Management plans to expand these efforts to 40 sites by year-end, which may further boost margins. Also, Collins Aerospace’s shift to automated torque systems eliminated defects while saving over 20,000 labor hours, a noteworthy development, in my view. Then, investments in automation at facilities like Pratt & Whitney’s new Oklahoma City plant boosted production capacity for critical military engines. Thus, you see bottom-line-fueling initiatives across all RTX business units.
Strong Growth Prospects Infer Attractive Valuation
Considering RTX’s promising growth trajectory, I believe the stock trades at an attractive valuation today. Wall Street projects EPS of $5.57 for FY2024, marking a 10% year-over-year increase, with further growth to $6.08 EPS expected in FY2025. This would place the stock’s forward P/E ratio at 19.3 — an attractive multiple for a company dominating an oligopolistic industry while boasting a huge backlog that secures its near-term growth prospects.
In particular, RTX’s backlog stood at $221 billion at the end of Q3, representing nearly three years of sales and a significant growth catalyst. Notably, 44% of Raytheon’s backlog comprises international orders, highlighting RTX’s growing global reach and its waning dependency on domestic orders over time. If you combine this with the fact that demand in the industry remains elevated due to continued global geopolitical unrest, it’s easy to be optimistic about the company’s overall prospects. In fact, my calculations show that the backlog alone, combined with management’s ongoing cost-control efforts, is likely to deliver double-digit adjusted EPS over the medium term on a CAGR basis.
Is RTX Stock a Buy, According to Analysts?
Wall Street sentiment toward RTX remains enthusiastic following the stock’s extensive 44% rally over the past year, with analysts collectively rating the stock as a Moderate Buy. In particular, RTX has gathered seven Buys and eight Holds over the past three months. The average RTX stock forecast of $135.47 implies a 13.4% upside potential from current levels.
If you’re unsure which analyst to trust if trading or investing in RTX stock, Seth Seifman of J.P. Morgan (JPM) stands out as the most astute and accurate over the past 12 months. His recommendations have delivered an average return of 10.05% per rating, with an impressive 60% success rate.
Final Thoughts
Overall, RTX appears well-positioned to deliver strong performance in 2025 and beyond. The company’s growth in revenue and EPS, backed by demand for defense systems, a thriving commercial aftermarket, and operational efficiencies, has generated significant momentum.
Given the massive $221 billion backlog and ongoing industry tailwinds, I don’t see any reason why this trend won’t endure. Along with the stock’s attractive valuation, RTX remains a compelling investment in the aerospace and defense sector at current price levels.
