RTX RTX Corporation
Mature aerospace-defense platform with steady cash flows, fairly valued at best.
The story
RTX is a diversified aerospace-defense conglomerate formed from the Raytheon-UTC merger, operating Collins Aerospace, Pratt & Whitney, and Raytheon defense businesses. Its moat comes from entrenched OEM positions on military platforms and commercial aircraft, long certification cycles, and massive installed-base aftermarket revenue. The GTF engine recall is largely behind it, and commercial aerospace aftermarket plus defense backlog provide steady mid-single-digit growth, but this is a mature low-double-digit-margin business with no path to franchise-like excess returns.
Revenue growth of 5.5% year one reflects defense backlog conversion and commercial aftermarket tailwinds, decelerating to 3.5% terminal growth (below risk-free) as platform mix matures. Target margin of 13.5% is modestly above current 12.5% as GTF costs fade and merger synergies fully materialize, but well below aerospace peaks given RTX's defense mix. Sales-to-capital of 1.10 is slightly above the 0.91 historical as the business matures and capex normalizes post-merger; beta of 1.05 reflects government revenue stability offset by commercial aerospace cyclicality.
Value drivers
| Revenue growth (Y1) | 5.5% |
| Terminal growth | 3.5% |
| Forecast horizon | 7y |
| Target operating margin | 13.5% |
| Years to target margin | 5 |
| Sales-to-capital | 1.10 |
| Beta | 1.05 |
| Failure probability | 0.0% |
| Cost of capital (WACC) | 9.2% |
| Terminal WACC | 9.0% |
Valuation bridge
| PV of explicit FCFF | 37.51B |
| PV of terminal value | 87.85B |
| Equity value | 93.00B |
| ÷ shares → per share | $69.00 |
News
bearish -0.20 · 8 articles
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- RTX Slips 1% as Tariffs Raise FAA's Radar Bill
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 98.64B | 5.5% | 12.7% | 10.14B | 4.67B | 5.46B | 5.00B |
| 2 | 103.74B | 5.2% | 12.9% | 10.83B | 4.63B | 6.20B | 5.20B |
| 3 | 108.75B | 4.8% | 13.1% | 11.53B | 4.56B | 6.97B | 5.36B |
| 4 | 113.65B | 4.5% | 13.3% | 12.23B | 4.45B | 7.79B | 5.48B |
| 5 | 118.38B | 4.2% | 13.5% | 12.94B | 4.30B | 8.63B | 5.57B |
| 6 | 122.92B | 3.8% | 13.5% | 13.43B | 4.13B | 9.31B | 5.50B |
| 7 | 127.22B | 3.5% | 13.5% | 13.90B | 3.91B | 9.99B | 5.40B |
Key risks
- Geopolitical budget pressures or defense sequestration reducing procurement spend
- Commercial aerospace aftermarket slowdown if airline profitability deteriorates
- GTF engine program cost overruns or additional inspection requirements
Catalysts
- Defense budget acceleration in US and allied countries replenishing munitions stockpiles
- Commercial widebody recovery driving higher aftermarket services revenue