RTX’s Business Is Strong, but These Risks Are Holding Back the Stock

RTX earnings grew 33% year over year, helped in part by tariff cost recoveries. (Courtesy RTX)

Key Points

• RTX reported third-quarter earnings of $2.26 a share on sales of $25 billion, beating Wall Street expectations.
• The company raised its 2026 sales guidance to about $97.3 billion and its earnings-per-share guidance to about $7.70.
• Investors have been concerned about defense stocks due to rising interest rates, higher inflation, an unpopular war and potential contract reform.

RTX’s business is performing well. Someone should tell investors that.

Tuesday, RTX reported third-quarter earnings per share of $2.26 from sales of $25 billion. Wall Street was looking for earnings per share of $1.78 from sales of $24.1 billion. A year ago, RTX reported earnings per share of $1.70 from sales of $22.5 billion.

Earnings grew 33% year over year, helped in part by tariff cost recoveries.

For 2026, RTX now expects sales of about $97.3 billion. Prior guidance was $95.5 billion. Wall Street currently projects $96.3 billion. Earnings per share are now expected to be about $7.70, up from prior guidance of $7.18. Wall Street currently projects EPS of $7.26.

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It’s a solid quarterly report. Shares were up 2% at $196, while S&P 500 futures were down 0.1% and Dow Jones Industrial Average futures were up 0.2%.

“Demand for our products remains robust with over $81 billion of new commercial and defense awards, resulting in a record backlog of $340 billion,” said CEO Chris Calio in a news release.

Investors haven’t been buying the positive spin lately. Coming into Tuesday trading, RTX stock was up about 5% this year after falling about 5% since the start of the Iran war in late February.

They have become increasingly concerned about defense stocks amid rising interest rates, higher inflation, an unpopular war, potential contracting reform, and a looming midterm election.

RTX, of course, also has a large commercial aerospace business. Investors have worried about that too, fearing rising oil prices, which can reduce air travel demand, and a potential shift in RTX’s business mix to lower-margin new jet parts from higher-margin aftermarket parts and service.

Those headwinds are overcoming the tailwind of higher earnings. RTX is expected to earn $7.93 in 2027, up from about $7.26 in 2026. What’s more, estimates are rising. At the start of the year, Wall Street expected 2027 earnings of about $7.60.

Those 2027 estimates are likely to rise again after the strong third-quarter report.

Recent declines have left RTX shares trading at about 25 times earnings expected over the coming 12 months, down from 30 times in March.

Write to Al Root at allen.root@barrons.com.

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