RTX
RTX CorpNYSEValuation snapshot
Above bull casePrice is above even the bull case.
Price captured with valuation · Valuation Sep 5, 2026
What drives RTX's base case?
base-case thesisRTX's recent growth is supported by both commercial aviation demand and expanding defense orders rather than one isolated program. The forecast starts near management's raised outlook and slows as comparisons become harder. Higher repair activity, production volume, and productivity improve profitability, while continued investment is required to turn the backlog into deliveries.
What shapes the assumptions
$289 billion backlog, up 22% from the prior year
period-end backlog
Raises revenue growth
Pratt commercial aftermarket sales increased 25% in Q2
commercial aftermarket growth
Raises operating margin
Capital spending remained near 3% of annual sales
capital expenditures divided by sales
Informs reinvestment
Effective tax rate was 19.1% in both 2024 and 2025
effective income-tax rate
Informs tax rate
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 25.2% a year. Over the last 5 years it grew 8.5% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- Or, holding growth steady
- the price is also consistent with a 27.7% operating margin, against the 13.0% assumed here.
- How confident is this estimate?
- Robustness 55.0/10 (Moderate) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Company value drivers
Ranked operating metrics and the valuation assumptions they influence.
1. Total backlog, period end
Contracted commercial and defense work indicates the depth and duration of future sales demand.
$289B
reported2. Second-quarter total segment profit margin
This comparable quarterly measure shows whether production scale, aftermarket mix, and contract execution are improving core profitability.
12.2%
reported3. Annual capital spending as a share of sales
The ratio measures how much physical investment RTX requires for each sales dollar and therefore affects cash available after reinvestment.
3.0%
derived4. Second-quarter Raytheon fixed-price sales share
This measures exposure to contracts where cost inflation and execution overruns can either enhance or damage profitability.
62.1%
derived5. Annual free cash flow margin
The ratio tracks how effectively reported sales become cash after capital spending and is a practical check on reinvestment assumptions.
9.0%
derivedBase inputs from financials
source period →Base revenue (TTM)
$93.5B
Diluted shares
1,365,000,000
Net cash
—
Bear
low confidence$63.17
IV / share
-68.5% vs $200.79
- Explicit cash flows
- $16.83
- Terminal value
- $46.34
- Net cash
- $0.00
- Intrinsic value / share
- $63.17
73.4% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth6.0% → 5.0% → 4.5% → 4.0% → 3.5%medium
How derived: RTX raised 2026 organic-growth guidance to 0.08-0.09 after first-half organic growth of 0.13, but this case assumes normalization below guidance as difficult comparisons, divestitures, supply constraints, and fixed-price execution risks emerge.
Why this confidence: Management's explicit second-half growth outlook ↑, Five-year demand and contract-timing uncertainty ↓
Measured by
- Total backlog, period end$289Breported
Evidence for
- Management said second-half 2026 organic growth should slow to approximately 0.05 at the midpoint after 0.13 in the first half.[RTX Q2 2026 Earnings Call]· primary
Evidence against
- Quarter-end backlog reached $289 billion, 0.22 above the prior year, while Q2 organic sales grew 0.16.[RTX Q2 2026 Results]· primary
Operating margin11.5%medium
How derived: The recent quarterly company margin was approximately 0.114 and total segment margin reached 0.122, but this case assumes supply-chain inflation, Pratt remediation, and fixed-price cost pressure prevent meaningful consolidated improvement.
Why this confidence: Recent reported consolidated profitability ↑, Uncertain fixed-price program costs ↓
Measured by
- Second-quarter total segment profit margin12.2%reported
- Second-quarter Raytheon fixed-price sales share62.1%derived
- Annual free cash flow margin9.0%derived
Evidence for
- RTX disclosed continuing supply disruptions, inflation, labor pressure, and limited ability to recover costs on fixed-price contracts.[RTX Q2 2026 Form 10-Q]· primary
Evidence against
- Q2 2026 margins expanded at Collins, Pratt & Whitney, and Raytheon, with total segment margin rising from 0.111 to 0.122.[RTX Q2 2026 Results]· primary
Tax rate21.0%medium
How derived: RTX's 2025 effective rate was 0.191 and its first-half 2026 rate was 0.163, but this case normalizes to the 0.21 federal statutory rate as reorganization, stock-compensation, and audit benefits fade.
Why this confidence: Statutory-rate anchor ↑, Volatile credits, audits, and international tax effects ↓
No tracked driver measures this assumption yet.
Evidence for
- The 2025 federal statutory income-tax rate was 0.21 before state, foreign, credit, and other adjustments.[RTX 2025 Form 10-K]· primary
Evidence against
- RTX reported a 0.163 effective rate for the first half of 2026, aided by legislation, stock compensation, and legal-entity reorganizations.[RTX Q2 2026 Form 10-Q]· primary
Reinvestment rate40.0%low
How derived: RTX spent $2.627 billion on 2025 capital projects and $2.807 billion on company-funded research, and this case assumes capacity needs, remediation, and inefficient working capital consume 0.40 of after-tax operating profit.
Why this confidence: Reported capital and research spending ↑, Reinvestment includes uncertain future working-capital needs ↓
Measured by
- Annual capital spending as a share of sales3.0%derived
- Second-quarter Raytheon fixed-price sales share62.1%derived
- Annual free cash flow margin9.0%derived
Evidence for
- First-half capital expenditures increased to $1.215 billion from $1.043 billion as RTX invested to support production.[RTX Q2 2026 Form 10-Q]· primary
Evidence against
- Full-year free cash flow improved from $4.534 billion in 2024 to $7.940 billion in 2025 despite essentially unchanged capital spending.[RTX 2025 Results]· primary
Terminal growth2.0%medium
How derived: The Federal Reserve's 0.02 longer-run inflation objective provides a nominal-growth floor, while mature aerospace markets and long contract conversion periods justify no assumed real growth after year five.
Why this confidence: Central-bank long-run inflation anchor ↑, Terminal assumptions extend beyond observable contracts ↓
Measured by
- Total backlog, period end$289Breported
Evidence for
- The Federal Reserve defines inflation of 0.02 over the longer run as most consistent with its mandate.[Federal Reserve Longer-Run Goals]· primary
Evidence against
- RTX had $289 billion of remaining obligations, including commercial maintenance contracts that can extend for up to 20 years.[RTX Q2 2026 Form 10-Q]· primary
Base
low confidence$94.09
IV / share
-53.1% vs $200.79
- Explicit cash flows
- $23.17
- Terminal value
- $70.92
- Net cash
- $0.00
- Intrinsic value / share
- $94.09
75.4% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth8.0% → 7.0% → 6.0% → 5.0% → 4.5%medium
How derived: The path begins within RTX's raised 2026 organic-growth guidance of 0.08-0.09 and then fades as a $289 billion backlog supports delivery growth but unusually strong first-half comparisons normalize.
Why this confidence: Current-year company guidance ↑, Guidance does not cover the later forecast years ↓
Measured by
- Total backlog, period end$289Breported
Price implies: 25.2% vs our 6.1% — one of several sets that fit this price
Evidence for
- RTX raised 2026 adjusted sales guidance to $95-$96 billion and organic-growth guidance to 0.08-0.09.[RTX Q2 2026 Results]· primary
Evidence against
- Management said second-half growth should be approximately 0.05 because prior-year production recovery and F135 contract timing will not repeat.[RTX Q2 2026 Earnings Call]· primary
Operating margin13.0%medium
How derived: Total segment margin improved to 0.122 in Q2 2026 from 0.111 a year earlier, so backlog conversion, aftermarket mix, and productivity support gradual consolidated expansion toward 0.13.
Why this confidence: Margin expansion across all three segments ↑, Execution sensitivity of defense and engine contracts ↓
Measured by
- Second-quarter total segment profit margin12.2%reported
- Second-quarter Raytheon fixed-price sales share62.1%derived
- Annual free cash flow margin9.0%derived
Price implies: 27.7% vs our 13.0% — one of several sets that fit this price
Evidence for
- Q2 reported margins rose to 0.159 at Collins, 0.083 at Pratt & Whitney, and 0.126 at Raytheon.[RTX Q2 2026 Results]· primary
Evidence against
- RTX expects supply disruption to continue and warns that inflation can generate losses on fixed-price contracts.[RTX Q2 2026 Form 10-Q]· primary
Tax rate19.0%medium
How derived: The assumption holds the 2025 effective rate of 0.191 approximately constant, balancing durable research and international-income benefits against less-repeatable audit and reorganization items.
Why this confidence: Two consecutive annual observations near the assumption ↑, Tax benefits vary with audits and legal structure ↓
No tracked driver measures this assumption yet.
Evidence for
- RTX reported an effective income-tax rate of 0.191 in both 2024 and 2025.[RTX 2025 Form 10-K]· primary
Evidence against
- The first-half 2026 effective rate was only 0.163 because of tax-law, stock-compensation, and legal-entity benefits.[RTX Q2 2026 Form 10-Q]· primary
Reinvestment rate32.0%low
How derived: Annual capital spending near 0.03 of sales plus substantial research and working-capital requirements support reinvesting 0.32 of after-tax operating profit while improving cash conversion offsets part of the burden.
Why this confidence: Three years of disclosed capital and research spending ↑, Future working-capital conversion is difficult to forecast ↓
Measured by
- Annual capital spending as a share of sales3.0%derived
- Second-quarter Raytheon fixed-price sales share62.1%derived
- Annual free cash flow margin9.0%derived
Evidence for
- RTX spent $2.627 billion on capital projects and $2.807 billion on company-funded research in 2025.[RTX 2025 Form 10-K]· primary
Evidence against
- Free cash flow rose 0.75 in 2025 to $7.940 billion while annual capital spending remained nearly flat.[RTX 2025 Results]· primary
Terminal growth2.5%medium
How derived: The rate adds modest real growth to the Federal Reserve's 0.02 inflation objective because RTX has long-lived aerospace service agreements and defense replacement demand, while remaining below the explicit-period growth path.
Why this confidence: Long-duration service contracts ↑, Very long forecast horizon ↓
Measured by
- Total backlog, period end$289Breported
Evidence for
- Approximately 0.45 of RTX's remaining obligations relate to commercial maintenance agreements that can run for up to 20 years.[RTX Q2 2026 Form 10-Q]· primary
Evidence against
- Only approximately 0.25 of the $289 billion remaining obligations were expected to convert to revenue during the following 12 months.[RTX Q2 2026 Form 10-Q]· primary
Bull
low confidence$132.05
IV / share
-34.2% vs $200.79
- Explicit cash flows
- $29.83
- Terminal value
- $102.23
- Net cash
- $0.00
- Intrinsic value / share
- $132.05
77.4% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth9.5% → 8.5% → 7.5% → 6.5% → 5.5%low
How derived: Growth begins slightly above RTX's 0.08-0.09 guidance because Q2 organic growth reached 0.16 and backlog rose 0.22, then fades as capacity additions convert unusually strong commercial and defense demand.
Why this confidence: Broad double-digit growth across all segments ↑, Forecast exceeds current company guidance ↓
Measured by
- Total backlog, period end$289Breported
Evidence for
- Q2 organic sales grew 0.16, including 0.13 at Collins, 0.17 at Pratt & Whitney, and 0.18 at Raytheon.[RTX Q2 2026 Results]· primary
Evidence against
- Management's second-half outlook implied growth of approximately 0.05, below the bull case's opening rate.[RTX Q2 2026 Earnings Call]· primary
Operating margin14.5%low
How derived: The target assumes the current 0.122 total segment margin rises as Collins sustains mid-teen profitability, Pratt closes part of its margin gap through aftermarket volume, and Raytheon converts higher-volume missile programs efficiently.
Why this confidence: Profit growth exceeded sales growth in every segment ↑, Large improvement required at Pratt & Whitney ↓
Measured by
- Second-quarter total segment profit margin12.2%reported
- Second-quarter Raytheon fixed-price sales share62.1%derived
- Annual free cash flow margin9.0%derived
Evidence for
- Q2 operating profit grew 0.11 at Collins, 0.50 at Pratt & Whitney, and 0.29 at Raytheon, faster than sales at each segment.[RTX Q2 2026 Results]· primary
Evidence against
- Pratt's Q2 margin was still only 0.083, while powder-metal cash costs were expected to be approximately $0.7 billion in 2026.[RTX Q2 2026 Form 10-Q]· primary
Tax rate17.5%low
How derived: The assumption moves modestly above the first-half 2026 rate of 0.163, allowing durable research, foreign-income, and 2025 tax-law benefits to persist while excluding some one-time reorganization benefits.
Why this confidence: Current tax legislation and first-half results ↑, Dependence on deductions and legal-entity benefits ↓
No tracked driver measures this assumption yet.
Evidence for
- RTX said 2025 legislation lowered its forecast annualized 2026 tax rate through a larger foreign-derived deduction benefit.[RTX Q2 2026 Form 10-Q]· primary
Evidence against
- RTX's effective tax rate was 0.191 in 2024 and 2025, above the bull-case assumption.[RTX 2025 Form 10-K]· primary
Reinvestment rate26.0%low
How derived: The assumption treats 2025's sharp cash-conversion improvement and declining capital intensity as evidence that productivity and customer-funded development can support faster growth with only 0.26 of after-tax operating profit reinvested.
Why this confidence: Large recent improvement in free-cash-flow conversion ↑, High growth with low reinvestment requires sustained productivity ↓
Measured by
- Annual capital spending as a share of sales3.0%derived
- Second-quarter Raytheon fixed-price sales share62.1%derived
- Annual free cash flow margin9.0%derived
Evidence for
- Free cash flow increased from $4.534 billion in 2024 to $7.940 billion in 2025 while capital expenditures were nearly unchanged.[RTX 2025 Results]· primary
Evidence against
- First-half 2026 capital expenditures increased 0.165 from the prior-year period as RTX expanded capacity.[RTX Q2 2026 Form 10-Q]· primary
Terminal growth3.0%low
How derived: The rate assumes the 0.02 inflation objective plus approximately 0.01 real growth from long-lived commercial service demand and defense replenishment, without extending the explicit high-growth period indefinitely.
Why this confidence: Long-duration commercial and defense demand ↑, Perpetual real-growth assumption ↓
Measured by
- Total backlog, period end$289Breported
Evidence for
- Commercial backlog was $170 billion and defense backlog was $119 billion, with commercial maintenance obligations extending for up to 20 years.[RTX Q2 2026 Form 10-Q]· primary
Evidence against
- A 0.03 perpetual rate exceeds the Federal Reserve's 0.02 longer-run inflation objective and therefore requires lasting real expansion.[Federal Reserve Longer-Run Goals]· primary
Valuation robustness
reliability of the estimate, not a stock rating55 / 100 · Moderate
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 75% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
- The reinvestment assumption is low-confidence.→ reinvestment
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q3 2024 | 49.2% | 1.46 | -23.0% | 1.35B | -7.0% |
| Q1 2025 | 5.2% | 0.59 | 726.8% | 1.35B | 1.1% |
| Q2 2025 | 9.4% | -0.05 | -103.2% | 1.35B | 0.9% |
| Q3 2025 | 11.9% | 2.96 | 102.4% | 1.36B | 0.9% |
| Q1 2026 | 8.7% | 0.96 | 63.7% | 1.36B | 0.9% |
| Q2 2026 | 14.5% | 2.11 | 4065.0% | 1.37B | 0.8% |
Valuation history every run
History builds as the valuation is recalculated — this is the first recorded run.
Market inputs researched
The input is the U.S. Treasury's 10-year constant-maturity par yield reported for 2026-09-01, matching the long duration and U.S.-dollar denomination of the modeled cash flows.
The input uses the January 2026 average levered beta for 79 U.S. aerospace and defense firms, avoiding dependence on RTX's unusually low single-company trailing regression estimate.
The input is the trailing-12-month adjusted-payout implied U.S. equity risk premium published for 2026-06-01.
The input is RTX's closing market price on 2026-09-04, the latest completed trading session before the valuation date.
Generated 9/5/2026, 7:48:08 PM · pipeline v1.2.0