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Today's editorial pick for you
RTX is Firing on All Cylinders; Short-Term Upside May Be Limited
Posted On Oct 22, 2025 by Chris Markoch
RTX (NYSE: RTX) stock climbed 7.6% in the trading session after the company's third-quarter earnings report. The aerospace and defense company delivered a strong report with a beat on the top and bottom lines, which was unexpected after the company warned of tariff impacts in its defense business.
The company delivered $22.48 billion in revenue, which was 5.4% higher than estimates for $21.22 billion. That was 11.8% higher than the company's revenue in the same quarter in 2024.
Earnings per share (EPS) gains were even stronger. RTX delivered EPS of $1.70, beating expectations for $1.41 by over 20%. That was roughly the same percentage beat on a year-over-year (YoY) basis.
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The company also raised its full-year guidance at the low and high range for adjusted sales, organic sales growth and adjusted EPS. It left its guidance for free cash flow (FCF) unchanged. That's not much of a concern. The company has more than enough cash to deploy towards debt reduction and dividend payments. Plus, the company is guiding to $10 billion in FCF by 2027.
A Sum of Its Parts Play for Investors
Although RTX has managed to mitigate some of the expected tariff impacts, the uncertain nature of the tariffs will continue to be something for investors to watch. However, this report showed the company has other catalysts at play regarding its defense business.
The most significant catalyst is an ammunition shortfall, which is RTX's key revenue stream. Orders for its Coyote counter drone system, air-to-air missiles, and Patriot missiles were both up for the quarter. The company also reported a sizable backlog, including a 1.0x book-to-bill ratio that is likely to keep revenue flowing for some time.
But RTX also generates about half of its revenue from its commercial aerospace business. The company's Collins Aerospace division reported 11% organic sales growth and secured a 10-year contract with Japan Airlines to provide "comprehensive MRO services for their fleet of more than 50 787 widebody aircraft and future deliveries through 2035."
Similar growth was also evident in the company's Pratt & Whitney division, which saw 16% organic growth. This division has both commercial and defense businesses, including the F135 engine. The company was awarded a $2.8 billion contract for the production of Lot 18 of the F135 engine.
Is RTX a Buy or a Hold?
I left out "Sell" as an option because RTX clearly has room to grow. The question for investors is how much growth they want, and at what price. RTX stock trades at around 38x earnings, that's about a 6.5% premium to its historical average.
However, analysts forecast 11.9% earnings growth in the next 12 months and put the stock's forward price-to-earnings (P/E) ratio at 28x. That's still a slight premium to the stock's five-year average of around 27x.
All that says is that RTX is expensive to own near its all-time high. From a technical standpoint, the stock is showing signs of being overbought.
The stock is trading about 6% above analysts' consensus price target of $164.13. However, two analysts, Bernstein and Deutsche Bank, raised their price targets in the 30 days before earnings.
That said the high price of $190 leaves about 12% upside on top of the stock's growth of around 37% in the last 12 months. That's consistent with the 3- and 5-year total return in RTX stock.
That argues for a Hold. If you’re not in the stock, you'll want to see if other analysts follow suit after earnings. Price targets that move RTX stock towards $200 will make the Buy case more attractive. Otherwise, you'll want to wait for a pullback to pre-earnings levels.
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