RTX Corporation (formerly Raytheon Technologies Corp)

RTX occupies a structurally advantaged position that no other prime replicates: roughly half its revenue is commercial aerospace and half defence, giving it a natural hedge across two cycles that rarely peak together — and which, unusually, are peaking together in 2026. Collins Aerospace and Pratt & Whitney are entrenched on the installed base of the global narrowbody and widebody fleet, generating decades-long, high-margin aftermarket annuities. The Raytheon segment is the Western world's dominant supplier of ground-based air and missile defence effectors — Patriot, GEM-T, AMRAAM, Standard Missile, ESSM — precisely the munitions category that European rearmament and Middle East conflict have made scarce. A record $289 billion backlog at 30 June 2026, equal to roughly three years of sales, converts that positional advantage into unusual revenue visibility. The offsetting reality is that RTX carries $37 billion of debt, an $85 billion goodwill-and-intangible balance from the merger, and the unresolved cost tail of the GTF powder-metal remediation.

RTX Corporation is the world's largest aerospace and defence company by revenue, and the only prime contractor that simultaneously holds franchise positions in commercial aircraft engines, commercial aerospace systems, and ground- and sea-based integrated air and missile defence. It was created in April 2020 by the merger of Raytheon Company with the aerospace businesses of United Technologies Corporation, and it renamed itself from Raytheon Technologies to RTX in July 2023 alongside a consolidation from four operating segments to three.

What the company does

RTX designs, manufactures, and services aerospace and defence systems for commercial airlines, aircraft OEMs, business aviation operators, the U.S. Government (principally the Department of Defense, latterly styled the Department of War in contract announcements), and allied governments worldwide. Its FY2025 Form 10-K describes the three segments as follows: Collins Aerospace provides advanced aerospace and defence products; Pratt & Whitney supplies aircraft engines; and Raytheon delivers defensive and offensive threat detection and mitigation capabilities.

The company's independent characterisation is better expressed as three distinct economic engines bolted onto one balance sheet:

1. An installed-base annuity business (Pratt & Whitney and, to a lesser degree, Collins). Engines and nacelles are sold at or near cost — sometimes at a loss — to win position on an airframe, after which spare parts, overhauls, and long-term service agreements generate profit for twenty to thirty years. This is why Pratt & Whitney's reported segment margin (8.3% in FY2025) looks weak against Collins (16.2%) despite comparable revenue: Pratt is still absorbing original-equipment loss content on the GTF ramp while the aftermarket annuity has yet to reach maturity.

2. A cost-plus and fixed-price government contracting business (Raytheon, plus Collins' defence lines). Revenue is recognised over time on the percentage-of-completion basis, which makes reported margins highly sensitive to estimate-at-completion revisions. The FY2024 $575 million charge on a terminated foreign fixed-price development contract is the canonical illustration.

3. A component and systems supply business (Collins). Avionics, interiors, power management, and aerostructures sold to Airbus, Boeing, Embraer, Bombardier, and defence primes, with a large parts-and-repair aftermarket layered on top.

Revenue model and mix

Sources: FY2025 Form 10-K Item 1 (U.S. government and international sales tables, backlog); RTX 2025 Annual Report sales-mix infographic; Q3 2025 disclosure for the product/service split.

Note the structural shift: U.S. Government sales fell from 46% of revenue in FY2023 to 38% in FY2025 — not because U.S. volume declined (it rose from $31.6bn to $33.3bn) but because international and commercial revenue grew far faster. This is the single most important mix fact in the company today, because international direct commercial sales carry materially better margins than U.S. cost-type work, and because European air-defence procurement is the fastest-growing pool RTX addresses.

Value chain position and customers

RTX sits at the prime and Tier-1 layers simultaneously. On F-35 it is a major subsystem supplier (F135 propulsion via Pratt; sensors and avionics via Collins) to prime contractor Lockheed Martin — a direct competitor at the enterprise level. On Patriot and SPY-6 it is the prime. On A320neo it is a propulsion and nacelle supplier to Airbus, which in March 2026 was reported to be formally seeking damages from Pratt & Whitney over GTF disruption. This simultaneous supplier/competitor/counterparty posture across the same customer set is a defining feature of RTX's commercial relationships and a recurring source of litigation and negotiation risk.

End-markets served: commercial air transport (OE and aftermarket); regional and business aviation; rotorcraft; military fixed-wing and rotary propulsion; integrated air and missile defence; naval combat systems; precision-guided munitions; space sensing and communications; airport and airline IT infrastructure; and government training and mission services.

Stated strategy

Management's articulation of strategy has become notably narrower and more operational under Calio than it was under Hayes. The recurring themes across the FY2025 results, Q1 2026 and Q2 2026 releases are four:

1. Execution and delivery of backlog. "Our continued focus on operational performance and execution" (Q4 2025) and "delivering our backlog" (Q1 2026) are the phrases management returns to in every release.

2. Capacity expansion. "Expanding production capacity" and "making significant investments to increase output."

3. New capability introduction. "Investing in new capabilities" and "accelerating the fielding of new capabilities" — a formulation aimed at defence customers frustrated by delivery timelines.

4. Productivity. Q2 2026 explicitly cites "increase productivity" alongside capacity and technology.

Absent from the current strategic vocabulary, relative to 2021–2023: large-scale M&A, portfolio transformation, and the merger-synergy programme (which concluded, with over $32bn of capital returned since the merger cited as of Q3 2024). RTX today is running an execution strategy, not a transformation strategy.

Announced initiatives, last 24 months

Guidance and medium-term targets

Two guidance raises inside six months, with the organic growth range lifted by a full three points at the half — an unusually aggressive revision sequence for a company of this size, and a direct read-through from the 22% year-on-year backlog growth. RTX does not publish formal medium-term (three- to five-year) financial targets; the closest proxy is the backlog conversion disclosure that approximately 25% of the $268bn year-end 2025 RPO converts to revenue within twelve months.

Collins Aerospace

Avionics

Pro Line Fusion: integrated flight deck for business, regional, and military transport aircraft; touchscreen primary displays, synthetic/enhanced vision, integrated FMS. Customers: Bombardier, Embraer, Airbus/Boeing retrofit, military trainers. Continuously updated; latest certifications ongoing through 2026.

Head-Up Guidance Systems (HGS) and EVS/CVS: head-up display and combined vision for air transport and business jets; enables lower-visibility operating credit.

MultiScan ThreatTrack weather radar: predictive hazard detection for air transport.

Military avionics and displays: cockpit displays and processors on F-35, F-22, F-16, C-130, rotary-wing platforms.

FlightSense / Ascentia: data-driven diagnostic and prognostic analytics sold as a service layer over the avionics installed base.

Interiors

• Business, premium, and economy seating systems; galleys, lavatories, and cargo systems; oxygen systems; evacuation slides and rafts; lighting; air management and environmental control systems. Target customers: Airbus, Boeing, Embraer, airline retrofit programmes. Pricing is programme-specific and not disclosed.

Mission Systems

ARC-210: airborne software-defined radio family — the U.S. military's most widely fielded airborne radio; multiple generations, latest with SATCOM and anti-jam waveforms.

ACES 5: ejection seat — U.S. Air Force fighter and trainer platforms.

Anti-jam GPS: GAS-1/NavHub/Digital GPS Anti-Jam Receiver product lines for aircraft, ground vehicles, and munitions.

• Simulation and training systems; airborne and ground communications infrastructure.

Space systems: spacesuit/EMU sustainment for the International Space Station; thermal control and life-support hardware.

• 2025 awards: satellite communication systems for survivable multi-band communications; primary subcontractor role on the U.S. Navy's Very Low Frequency communication subsystem, mission C3 infrastructure, AEHF, and voice communications; FAA Radar System Replacement programme under the Department of Transportation's Brand New Air Traffic Control System.

Power & Controls

FADEC engine control systems: and engine accessories.

Electric power generation and distribution: including the 787 electrical system.

Fuel systems and pumps: - Landing systems — wheels, and DURACARB carbon brakes for air transport and military aircraft.

• (Divested: actuation and flight controls to Safran, 2025; hoist & winch, 2024; sensing and controls / Simmonds Precision Products to TransDigm, 2025.)

Aerostructures

Nacelle systems and thrust reversers: including position on A320neo and 787; integrated propulsion system packages sold to airframers and engine OEMs; associated nacelle MRO network.

Connected Aviation Solutions

ARINC: global aeronautical communications network (datalink, ACARS, airport messaging).

• vMUSE / airport common-use platforms; airline operations software.

FOMAX: aircraft data gateway; Ascentia fleet analytics. Sold on subscription and per-message pricing models — the closest thing in RTX's portfolio to recurring software revenue, though the company does not break out its size.

Collins' largest single customer concentration: sales to Airbus and Boeing combined, net of discounts and incentives, were 16% of Collins segment sales in FY2025, 16% in FY2024, and 19% in FY2023 (FY2025 10-K).

Pratt & Whitney

Large commercial engines

GTF (PW1000G family): geared turbofan. Variants: PW1100G-JM (Airbus A320neo family), PW1500G (Airbus A220), PW1900G (Embraer E2), PW1400G (Irkut/Yakovlev MC-21, effectively dormant). Per the FY2025 10-K, the GTF family powers over 2,600 aircraft for more than 90 operators across three aircraft platforms.

GTF Advantage: the durability and thrust upgrade: FAA type certification February 2025; EASA validation October 2025; EASA aircraft-level certification on the A320neo family 17 April 2026. Delivers up to double the time on wing, ~4% more take-off thrust at sea-level airports and ~8% at high-altitude airports. First shipset to Airbus May 2026; Pratt targets 100% Advantage-standard deliveries to Airbus by early 2028 on a 24-month cutover.

Hot Section Plus (HS+): retrofit package introduced at Paris 2025 that folds an estimated 90–95% of the Advantage durability benefit into existing PW1100G engines at normal shop visits; availability during 2026.

V2500: (via International Aero Engines JV) — A320ceo family; now a large and profitable aftermarket pool.

PW4000: widebody legacy; PW2000 — C-17 and 757.

Military engines

F135: sole propulsion for all three F-35 variants; production plus the funded Engine Core Upgrade (ECU) development programme. F135 production and sustainment were the largest single driver of Pratt's 30% military growth in Q4 2025.

F119: F-22 Raptor. F100 — F-15/F-16 global fleet sustainment. F117 — C-17. TF33 — B-52/E-3 legacy sustainment.

XA103: all-digital adaptive-cycle demonstrator for the U.S. Air Force Next Generation Adaptive Propulsion (NGAP) programme.

Pratt & Whitney Canada

PT6A / PT6E: turboprop family (including the PT6E-67XP with dual-channel FADEC); PW100/PW150/PW127XT regional turboprops (ATR, Dash 8); PW300/PW500/PW800 business-jet engines (PW800 on Gulfstream G500/G600/G700/G800 and Dassault Falcon 6X); PW200/PW210 helicopter engines; APS auxiliary power units.

• FY2025 orders and commitments: more than 1,500 GTF engines and more than 2,400 Pratt & Whitney Canada engines.

Aftermarket and services

EngineWise: service portfolio; long-term Fleet Management Programmes and Engine Flight Hour agreements; 18+ GTF aftermarket facilities worldwide; Global Material Solutions for CFM56 parts. GTF MRO capacity is reported up ~300% versus 2019 and 26% year-on-year in 2026.

Raytheon

Land and air defence

Patriot: the franchise. Fire units, launchers, radars, and command-and-control. Described by the company as the only combat-proven ground-based air and missile defence capability able to counter advanced long-range cruise missiles, tactical ballistic missiles, and the full spectrum of air-breathing threats.

PAC-2 GEM-T interceptor: lower-cost semi-active blast-fragmentation round; production expanding at Chambersburg, Pennsylvania and at Schrobenhausen, Germany (COMLOG JV with MBDA Deutschland). Unit price reported in the $2–4m range versus ~$5.3m for the competing PAC-3 MSE (third-party estimate; RTX does not disclose unit pricing).

LTAMDS (AN/MPQ-65B) / GhostEye: the 360-degree GaN radar replacing the legacy Patriot radar.

NASAMS: (with Kongsberg) — short/medium-range air defence; the principal Ukraine and European air-defence export.

Coyote / KuRFS: counter-UAS effector and radar pairing.

High-energy laser and high-power microwave: directed-energy prototypes.

Effectors and precision weapons

AMRAAM (AIM-120): the Western beyond-visual-range air-to-air standard; also the NASAMS effector.

AIM-9X Sidewinder: a $1.1bn U.S. Navy Block II production award in June 2026.

• StormBreaker (GBU-53/B), Paveway laser-guided bombs, JSOW, Excalibur precision artillery, TOW, Javelin (joint venture with Lockheed Martin).

Standard Missile family: SM-2, SM-3 Block IIA (a $745m Missile Defense Agency award in August 2026), SM-6.

Evolved SeaSparrow Missile (ESSM): and Tomahawk — both cited as FY2025 naval growth drivers.

Next Generation Interceptor (NGI): development; Next Generation Short Range Interceptor (NGSRI); HACM hypersonic air-breathing cruise missile (with Northrop Grumman).

Sensors, radars, and space

AN/SPY-6 family: U.S. Navy's scalable air and missile defence radar; a $515m award in June 2026.

AN/TPY-2: THAAD forward-based radar. AN/APG-79 / APG-82 fighter AESA radars.

SharpSight: multi-domain surveillance radar introduced 2025.

Blue Canyon Technologies: small-satellite bus manufacturer; agreement to sell for $620m announced with Q2 2026 results, signalling a retreat from merchant smallsat manufacturing.

Pricing model. Effectors and systems are sold on firm-fixed-price production contracts, cost-plus development contracts, and government-to-government FMS cases. Unit prices are not disclosed by RTX; where cited above they come from third-party defence trade reporting and should be treated as indicative.

Income statement

Margins

Revenue CAGR FY2021→FY2025: 8.3%. Adjusted diluted EPS CAGR over the same period: 10.2%.

Commentary. The five-year revenue line tells two stories. From FY2021 to FY2023, growth was pedestrian — 4.2% then 2.8% — as commercial recovery was offset first by supply-chain constraint and then, decisively, by the $5.4bn Powder Metal contra-revenue in FY2023, which is the reason FY2023 diluted EPS of $2.23 fell 36% while adjusted EPS rose to $5.07. From FY2024 the trajectory inflects hard: +17.1% then +9.7%, with FY2025 organic growth of 11%. The inflection is not a single driver but a triple coincidence — commercial aftermarket normalisation, the Pratt military ramp on F135, and the European and Middle East air-defence surge at Raytheon.

Margin is the more interesting line. Reported operating margin moved from 8.1% to 10.5% in a single year, but roughly half of that improvement is the absence of FY2024's non-recurring burden: $0.9bn of legal-matter charges, a $0.6bn contract-termination charge at Raytheon, a $0.2bn titanium-sourcing charge and a $0.2bn contract-fulfilment impairment at Collins. Strip those out and the honest measure is adjusted segment operating margin, which improved 50 basis points from 11.4% to 11.9% — real, but modest. The genuinely encouraging signal sits in H1 2026, where adjusted segment margin reached 12.5% with all three segments expanding simultaneously, and where Raytheon alone added 130 basis points to 12.4%.

R&D deserves specific note: company-funded R&D declined 4.3% in FY2025 to $2,807m and fell to 3.2% of sales from 3.6%. Combined company- and customer-funded R&D was $7.7bn per the 2025 Annual Report.

Balance sheet

Sources: FY2025 Q4 earnings release balance sheet (2024, 2025); FY2023 10-K XBRL details (inventory, contract assets, fixed assets for 2021–2023); third-party compilation of 10-K filings for 2021–2022 total assets, goodwill, intangibles, and current assets.

Commentary. Two features dominate. First, goodwill and intangibles of $85.2bn at year-end 2025 equal 49.8% of total assets and 127% of book equity — the enduring accounting legacy of the Rockwell Collins and Raytheon transactions. Acquisition accounting adjustments (principally amortisation of those intangibles) cost $2,005m of operating profit in FY2025 and $1.15 of GAAP EPS. This is a non-cash but permanent wedge between GAAP and adjusted earnings, and it is the single largest reason RTX's headline P/E looks expensive.

Second, deleveraging is real and rapid. Total debt fell $3.4bn in FY2025 to $37.9bn while cash rose $1.9bn, cutting net debt by $5.2bn and net debt/EBITDA from 3.27x to 2.23x. Debt-to-equity fell from 0.69 to 0.58, having peaked at 0.73 in FY2023 after the $10bn ASR. Management has clearly prioritised balance-sheet repair over buybacks: repurchases in FY2025 were $50m, effectively zero, and nil in H1 2026, against $3,574m of dividends. By 30 June 2026 only ~$0.6bn of the October 2023 $11bn authorisation remained.

Working capital swung from negative $366m to positive $1,548m, but the more meaningful contract-accounting picture is that contract assets rose $2.5bn while contract liabilities rose $3.0bn — customer advances on the defence ramp are funding a material part of the working-capital build, a favourable dynamic that should persist while book-to-bill stays above 1.

Cash flow

Commentary. FY2025 free cash flow of $7,940m was up $3,406m, or 75%, on FY2024 — the most important single number in the FY2025 results. The conversion ratio (FCF/adjusted net income) reached 93%, against 59% in FY2024. Three drivers: the absence of large legal-settlement cash outflows, moderating GTF customer-compensation payments, and $3,418m of accounts-payable and accrued-liability build. Capital expenditure was flat year-on-year at $2.6bn despite the capacity ramp — a figure worth watching, because the announced investments in Rhode Island ($100m, June 2026), Poland ($25m, September 2026), Malaysia MRO expansion, and German GEM-T capacity imply capex should rise from here.

H1 2026 free cash flow of $4,187m against $720m in H1 2025 confirms that the cash inflection is not a one-year phenomenon.

Ratios

ROE, ROA, ROIC, and turnover are computed on average balances; ROIC uses NOPAT (operating profit × (1 − effective tax rate)) over average debt plus total equity. Discrepancy flagged: a widely used market-data vendor reports trailing-twelve-month ROE of 12.27% and ROIC of 9.40% as of September 2026; both are higher than the FY2025 figures above because they use trailing-twelve-month earnings (which include the stronger H1 2026) and period-end rather than average capital. The cash conversion cycle excludes contract assets and contract liabilities, which together are larger than receivables, inventory, and payables combined; for a percentage-of-completion contractor the CCC is therefore a weak metric and should not be read as a working-capital efficiency measure.

Trend synthesis. RTX in FY2025 crossed from a repair story to a compounding story. Every principal ratio improved: leverage down a full turn, interest coverage up 50%, margins up across all three segments, cash conversion restored. The two ratios that have not yet recovered are ROIC (7.2%, still below a reasonable cost of capital given the merger-inflated invested capital base) and asset turnover (0.53x), and both are functions of the same thing — $85bn of goodwill and intangibles that will take a decade of amortisation to work down.

Management guidance

For FY2026, following two raises, management guides to adjusted sales of $95.0–96.0bn (organic growth 8–9%), adjusted EPS of $7.10–7.25, and free cash flow of $8.50–8.75bn. At the midpoints this implies revenue growth of 7.8% over FY2025, adjusted EPS growth of 13.7%, and free cash flow growth of 8.6%. H1 2026 delivered $46.8bn of sales and $3.67 of adjusted EPS, meaning the guidance requires roughly $48.7bn and $3.51 in H2 — a modest sequential step that looks conservative against a backlog growing 22%.

Consensus expectations

Analyst mean price targets cluster between $224.97 and $234.82 with a consensus rating of Buy, implying 12–17% upside. Trailing-twelve-month revenue of $93.50bn already exceeds FY2025 by 5.5%, confirming that the guided acceleration is being delivered rather than promised.

Bull case

1. The backlog is not an aspiration, it is a contract. $289bn at 30 June 2026, up 22% year on year, with 25% of the year-end 2025 balance converting within twelve months. Raytheon's Q2 2026 book-to-bill of 2.4 on ~$20bn of awards means the backlog is still growing faster than revenue can consume it. Revenue visibility of this quality is worth a premium multiple in any environment; in a rearmament cycle it is worth more.

2. Pratt & Whitney's margin is the single largest identified, quantified, self-help opportunity in large-cap aerospace. Pratt earns 8.3% on $32.9bn of revenue against Collins' 16.2%. Every 100 basis points of Pratt margin is roughly $330m of operating profit and about $0.19 of EPS. The GTF Advantage certification, the Hot Section Plus retrofit, declining AOGs, moderating compensation payments, and the maturing shop-visit annuity are five distinct mechanisms all pushing in the same direction over the next 24–36 months.

3. Cash generation has re-rated and capital allocation is about to loosen. Free cash flow went from $4.5bn to $7.9bn to a guided $8.5–8.75bn, while net debt/EBITDA fell from 3.27x to 2.23x. With only $0.6bn of buyback authority remaining, RTX is approaching the point where it must announce a new authorisation — and, for the first time since 2020, could contemplate acquisitions. Neither is in current estimates.

Bear case

1. The multiple already discounts the recovery. At 40x GAAP and 28x forward adjusted EPS with ROIC of ~7.2%, RTX is priced as though Pratt's margin normalisation is a certainty. It is not: Pratt has missed on GTF for a decade, the AOG population is still guided at ~350 aircraft per day through end-2026, and management declined at Farnborough to give a precise current figure when asked twice. The market's 4.4% negative reaction to a Q1 2026 beat-and-raise shows how little room the valuation leaves.

2. The margin expansion is partly borrowed. Company-funded R&D has been flat in nominal dollars for five years and has fallen from 4.2% to 3.2% of sales — roughly a full point of margin. Simultaneously, capex was flat at $2.6bn in FY2025 despite an announced capacity ramp. If the true cost of the ramp shows up in FY2027 capex and R&D at the same time that customer-funded programmes roll off, the margin bridge reverses.

3. The exogenous risks are unusually dense and are already materialising. Tariffs cost ~$0.5bn in 2025 and forced the only guidance cut of the period. Airbus, RTX's largest commercial customer, is reported to be seeking damages. DOJ deferred prosecution agreements, an SEC order, and a State Department consent agreement are all live. A customer bankruptcy cost $157m in one quarter and $108m in another. Lockheed's PAC-3 MSE competes inside RTX's own launcher. Any one is manageable; the pattern suggests a company where surprises arrive at a rate of two or three a year.

Catalysts and monitorables — next twelve months

Analyst verdict

RTX has completed the hardest part of a difficult transition. Three years ago it was a company defined by a $6–7 billion engine defect, a $10 billion buyback that levered the balance sheet at exactly the wrong moment, and a legacy compliance file that ultimately cost $0.9 billion to close. Today it generates $8 billion of free cash flow, carries 2.2x net leverage, and sits on a $289 billion backlog growing at 22% a year. That is not a turnaround narrative any more; it is an execution machine with a demand problem it would like to have.

The investment question is therefore not whether RTX is a good company — it plainly is — but whether it is a good stock at 40x trailing GAAP earnings and 28x forward adjusted earnings with a 7% return on invested capital. The bridge between those two numbers is entirely Pratt & Whitney. Pratt is the largest segment by revenue and earns half the margin of the smallest. If GTF Advantage delivers what Pratt says it will, if the AOG population falls to single digits as publicly committed, and if the shop-visit annuity matures on schedule, then Pratt migrates from 8% toward the low-to-mid teens over three to five years, group margin follows, ROIC crosses its cost of capital, and today's multiple looks reasonable in hindsight. If Pratt disappoints again — and Pratt has disappointed repeatedly for a decade — the multiple has no support.

Two second-order concerns deserve more weight than they typically receive. First, company-funded R&D has been flat in dollars while revenue grew 38%, and the resulting decline in R&D intensity from 4.2% to 3.2% of sales is doing real work in the margin bridge that investors are attributing to operational improvement. Second, capital expenditure was flat at $2.6 billion in a year of announced capacity expansion across Rhode Island, Germany, Poland, and Malaysia. Both figures should rise in FY2026–27. If they do not, question the ramp; if they do, question the margin trajectory.

Verdict: a structurally advantaged franchise, operationally improving, correctly priced for success and incorrectly priced for disappointment. The risk is asymmetric to the downside from here, and the appropriate posture is to own the backlog thesis while monitoring Pratt's grounding count and the FY2026 R&D and capex lines as the honest tests of whether the margin story is real.

End of dossier. Figures marked nd are not publicly disclosed by the company. Where sources conflicted — geographic revenue basis, institutional ownership, market capitalisation, analyst price targets, employee headcount, and credit ratings coverage — both readings and the reason for the divergence have been stated in place.

Operational context to flag: several 2026 defence awards reference "Operation Epic Fury," a U.S. military operation against Iran that appears to have driven substantial Patriot interceptor expenditure (trade reporting cites 1,060–1,430 Patriot missiles expended and consequent stockpile replenishment).