Jefferies maintains Hold rating on RTX stock amid MTU's raised guidance

RTX Corp. has demonstrated strong performance, with its stock up over 50% year-over-year and nearing its 52-week high, leading Jefferies to reiterate a Hold rating with a $160 price target and Bernstein to upgrade its target to $154. This positive momentum is supported by MTU's raised 2025 revenue and EBIT margin guidance, driven by robust aftermarket demand for GTF, V2500, and GEnx engines, potentially adding $0.10 to RTX's EPS. Additionally, Raytheon, an RTX segment, secured significant defense contracts exceeding $200 million for missile systems and GPS receivers, highlighting strong demand in its defense business, although challenges persist with Pratt & Whitney's GTF engines impacting free cash flow.

Analysis

RTX Corp. presents a strengthening but mixed operational profile, with its stock trading near its 52-week high after gaining over 50% in the past year. Positive momentum is primarily driven by two key areas: a robust defense segment and an improving commercial aftermarket outlook. The Raytheon business recently secured over $200 million in U.S. government contracts, including the largest single order for RAM launchers in two decades, indicating strong and sustained demand in missile defense. Concurrently, the commercial aerospace business received a positive read-through from partner MTU, which raised its 2025 revenue and margin guidance based on stronger-than-expected aftermarket demand for GTF, V2500, and GEnx engines, potentially adding 10 cents to RTX's EPS. Analyst sentiment reflects this complex picture, with Jefferies reiterating a 'Hold' at $160 and Bernstein raising its target to $154 while maintaining 'Market Perform'. The primary headwind remains the well-documented issues with Pratt & Whitney's GTF engines, which continue to negatively impact free cash flow estimates, even as the Collins Aerospace segment is expected to see margin improvement from higher Boeing and Airbus production rates.

Key Decisions for Investors

• Investors should weigh the strong growth catalysts from the Raytheon defense backlog and the brightening commercial aftermarket outlook against the significant, ongoing free cash flow pressure from the Pratt & Whitney GTF engine issues.
• Given the stock's 50% appreciation over the past year and neutral analyst ratings, it is prudent to assess if the positive segment performance is already reflected in the current valuation near its 52-week high.
• Monitor disclosures related to the costs and timeline for resolving the GTF engine problems, as any improvement on this front represents a primary catalyst for potential upside and improved capital return prospects.