RTX Outperforms Industry in the Past Year: Should You Buy?

RTX shares are up 62.5% over the past year, outperforming industry peers; Zacks forecasts 2026 sales growth of 5.4% and EPS growth of 8.3%, and RTX trades at a forward P/E of 30.00x versus the industry 33.28x. Recent positives include a DARPA contract via BBN Technologies, a German production contract for the Specter DR sight, and a $200M Columbus, GA expansion (new isothermal forging press expected to raise certain engine component output ~30%), supporting demand. Offsetting risks are rising tariffs and retaliatory trade measures since February 2025 that could disrupt international sales; Zacks assigns RTX a Rank #3 (Hold), suggesting existing holders may keep positions while new investors wait for clearer near-term visibility.

Analysis

RTX’s recent momentum masks an operational pivot that matters more than headline wins: incremental vertical integration (higher in-house forging and optics production) is shifting transient supply-chain margin back to the prime. That reduces COGS exposure to capacity-constrained tier-2 vendors and shortens cycle times for engine programs, which on a 12–36 month view should raise incremental gross margins on new production lots by a few hundred basis points relative to a fully outsourced model. Conversely, suppliers that previously captured margins on high-spec forgings and optical assemblies face both volume and pricing pressure — a likely consolidation vector over the next 18–30 months that could create acquisition targets or one-off supplier failures that temporarily disrupt output.

The headline risk is not a single contract miss but geopolitics and export-controls creep that can re-route multibillion-dollar content flows overnight; expect the highest sensitivity in the 0–12 month window around specific export license decisions and tariff escalations. Near-term catalysts are quarterly guidance and backlog disclosures (0–3 months) and mid-term are program rate changes (3–18 months); a program technical setback (engine test failure, quality recall) would be the fastest path to a marked reversal. Financially, the current market pricing already bakes in steady margin improvement — any sequential EPS downtick or delay in margin capture will compress multiples quickly because much of the upside is in operational leverage rather than pure topline growth.

The consensus underweights the interplay between localization incentives and European interoperability programs: if European allies accelerate ‘buy local / interoperable’ procurement, RTX’s systems business wins disproportionate scopes, but that cuts both ways for US export volumes. That asymmetry makes relative-value trades more attractive than naked directional bets: extract convexity with defined-risk option structures and use pair trades to isolate program and geography exposure rather than broad market beta.

Key Decisions for Investors

• Long RTX defined-risk call spread (12-month): buy 12-month 15% OTM calls and sell 12-month 40% OTM calls to express execution-driven upside while capping premium outlay. Rationale: captures margin tailwind from vertical integration and program awards; max loss = premium paid, potential 3:1+ payoff if RTX > ~25% by expiry. Monitor: unwind on an EPS guide cut or export-license refusal.
• Relative-value pair (6–12 months): long HII stock / short RTX equal notional. Rationale: isolates shipbuilding/domestic recap exposure vs aero/defense prime execution risk — trade profits if market re-rates HII for near-term cash conversion while RTX growth disappoints. Risk: if RTX continues to re-rate, cap position size to 3–5% NAV and use a 15% stop.
• Crash-protection (6–12 months): buy 12-month puts on RTX ~10–15% OTM (small position) to hedge tail political/trade risk that could wipe out multiple expansion. Rationale: low-probability, high-impact protection that preserves upside from the call spread while limiting downside from a tariff/export shock.
• Event-driven idea (3–9 months): accumulate HII on post-earnings weakness with a 12-month horizon and target 20–35% upside; keep 10% cash stop if backlog deterioration or shipyard execution miss appears. Rationale: higher implied operational optionality and less exposure to export-control volatility than large primes.